Trade union

Trade unions are organisation which work based on collective bargianing. Trade unions are established to protect emploees' interests such as wages, working conditions and training.

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  • Created by: Hanh
  • Created on: 17-01-13 23:05

Trade union

Advantages

  • Reducing the possibility of discrimination and prevent employers from exploiting workers using monopsony power.
  • Improve productivity: improvement in working condition and wages might create an incentive for workers to be more productive
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Disadvantages

  • Higher wages causes surplus and reduce employment
  • Higher price or lower quality: higher wages means higher cost of production, in markets that have inelastic demands, firms might pass on the higher costs to consumers in term of higher prices or lower quality goods.
  • Substitution effect: Employers substitute workers for capital, for example, which would further decrease level of employment

Evaluation

In the real world, the power of many unions have reduced massively during recent years. One of the causes can be the increase in competition or contestability of many markets (causes by factors such as the massive amount of deregulation taking place since 1990s). Firms are more incentivised to reduce costs of production to minimum in order to retain their places in the competitive world, therefore it is more difficult for union to force employers to increase wages. Most of the unions nowadays are more focused on the working conditions and working benefits rather than wages.

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