Trade Unions and Collective Bargaining

Introduction

The origins of unions’ existence can be traced back to the 18th century, when the rapid expansion of industrial society attracted women, children and immigrants to the work force in large numbers. The pool of unskilled and semi-skilled labor spontaneously organized themselves in fits and starts throughout its beginning, and would later become an important place for the development of trade unions. Trade unions were also endorsed by the Catholic Church towards the end of the 19th Century.

Today, we live in a world where workers have assumed great importance. The employers have started to realize the importance of workers. The employees too have started to form Trade Unions to protect their interests. Bosses around the world have recognized that the best way to resolve issues is by way of dialogue.

The employees have realized that to protect themselves from exploitation, unity is very important. This is one of the reasons why trade unions have become so important today.

What is a Trade Union?

A trade union is an organization or a group that workers join so that they can have their interests and goals well represented.

Why Trade Unions?

There is no definite answer to this question, mainly because each worker has his/hers own reasons for joining the trade unions. Studies have revealed that workers don’t unionize just to get better pay or good working conditions, though these are important factors. For example, a recent study revealed that average wage for union workers were 781$ while that for non-union workers was 612$. They also get more holidays, sick leaves, unpaid leaves, insurance plan benefits and various other benefits that non – union workers do not get. Studies suggest two factors- employer unfairness and the union’s clout as the main reasons why workers join unions.

The bottom line is that the urge to join trade unions often boils to the belief that workers have. They believe that it is only through unity that they can protect themselves from the management. In practice, low morale, fear of job loss and arbitrary management actions help foster unionization. For example, a survey of nurses revealed that trade unions are formed when employees fell disrespected, underpaid, unsafe and undervalued.

Importance of Trade Unions:

To Employees:

Members of the union tend to have higher wages than non-unionized workers.

Trade unions also sometimes act as representatives of workers in case of legal matters

The rights of the employees are better protected. For example, they cannot be unjustly removed from work.

To Employers:

Since the individual rights of workers are better protected and well represented, they tend to be motivated. This results in higher levels of efficiency and improved productivity.

What is Collective Bargaining?

It is the process by which representatives of management and the unions meet and negotiate over wages, hours and other terms and conditions of employment in good faith. It is a give and take process which aims to arrive at a conclusion beneficial to both the parties.

One of the most important aspects of collective bargaining is that it is a never ending process. It does not finish after an agreement has been reached. It continues for the life of the agreement and beyond. “Good faith bargaining” is at the center of effective labor-management relations. It means that no party should compel another to agree to a proposal. Nor does it require any of the parties to make any specific concessions.

The right to bargain collectively is recognized through international human rights conventions. Article 23 of the Universal Declaration of Human Rights recognizes the ability to join trade unions as a human right. Item 2(a) of the International Labor Organization’s declaration also identifies the same.

Collective bargaining is the last stage in the unionization process.

Organization Campaign

Authorization Cards

Representation Election

Certification

Contract Negotiation (Collective Bargaining)

Collective Bargaining Issues:

Management rights and union security are the major issues related to collective bargaining. Management rights: Almost all labor contracts include management rights. These are the rights which are reserved by the employer so that he/she can manage, direct and control its business.Union security: Another major concern is that of negotiating union security provisions. These are clauses in contracts to help the union in obtaining and retaining workers.

Classification of Collective Bargaining issues:

Possible topics of collective bargaining fall in to three categories: 1). Mandatory: Those issues which are identified specifically by labor laws or court decisions as subject to bargaining are mandatory issues. 2).Permissive: These are those collective bargaining issues that are not mandatory but related to certain jobs. 3.) Illegal: These are those collective bargaining issues that would require any of the parties to take illegal action. These are forbidden by law.

Some of the examples are:

Mandatory

Permissive

Illegal

Pay rates

Wages

Union security

Pensions holidays

Hours of employment

Job performance

Pension benefits of retired employees

Product prices for employees

Indemnity or performance bonds

Discrimination in treatment

Segregation of employees on the basis of race

Importance of Collective Bargaining:

To Employees:

It helps in developing a sense of responsibility amongst employees.

It helps ensure adequate wages and working conditions for employees.

It improves the morale and productivity of employees.

It helps in quick settlement of grievances.

To Employers:

It is relatively easier for the management to resolve disputes at the bargaining level instead of taking up complaints individually.

It improves the morale of employees and thereby reduces the cost of labor turnover.

It improves workers participation in decision making.

To Society

It promotes peace in the country. It results in a harmonious industrial climate which helps in the economic and social development of the country.

Challenges and pitfalls:

Bargaining deadlocks can result when there is no dialogue between workers and employers because of reluctance on the part of the parties to compromise. A general precondition of collective bargaining is that it must be done in good faith. However, in most cases each party has to push the other party to get what they want. While collective bargaining has been confrontational historically in some countries, the challenge is to achieve win-win situations.

Also, usually there are close connections between trade unions and political parties and as a result the focus of trade unions is not always on collective bargaining.

There is a also a lack of definite procedure to determine which trade union should be recognized as a bargaining agent to represent the interests of workers.

Collective Bargaining and the two faces of trade unions

Collective rather than individual bargaining has become necessary today. A reason why collective bargaining is necessary is that workers who are employed by a firm may not speak out in the fear of being fired. The collectiveness of trade unions alters the way the labor market operates or functions.

In a non-unionized setting, the firm is primarily concerned with the needs of the marginal worker- who is usually young and marketable and may be attracted by other firms and may ignore those who are older and less marketable. In short, the desires of those who are unlikely to leave the enterprise are not represented.

However, in a unionized setting, the union considers all the workers while representing them at the bargaining table so that the desires of those who are not likely to leave the enterprise are also represented.

It is believed that there are two faces of trade unions:

Monopoly Face

Collective voice/ Institutional response face

Effect on trade unions on efficiency

Effect of trade unions on distribution of income

Effect of trade unions socially

Monopoly face

Trade unions raise wages above competitive levels

Trade union work rules decrease productivity

Trade unions increase inequalities by raising the wages of highly skilled workers

Trade unions’ monopoly power leads to corruption. They are more interested in their own interests.

Collective voice

Trade unions help in reducing the labor turnover rate which helps both the employer and the employee. The employee enjoys job stability whereas the employer does not have to bear the high cost of labor turnover.

Unions’ standard rate policies ensure equality in distribution of income between workers of the same skill set.

Trade unions represent the political interests of poor and disadvantaged people.

Most of the trade unions have monopoly power which they use to raise wages above competitive levels. This reduces economic efficiency and increases inequalities by raising the wages of highly skilled workers.

As a collective voice, unions can have a positive effect on productivity. Unions collect information about the preferences of all workers leading the firm to choose the best mix of employee compensation.

If management uses the collective bargaining process to learn about and improve the operation of the workplace and the production process, unionism can be a significant plus to enterprise efficiency. On the other hand, if management responds negatively to collective bargaining (or is prevented by unions from reacting positively), unionism can significantly harm the performance of the firm. If management listens quietly to unreasonable union wage demands, the organized sector may suffer serious economic decline. If it reaches sensible agreements with labor, all parties may benefit.

Some examples of collective bargaining:

In Sports, collective bargaining has a big role to play. If there was no agreement on the terms and conditions that are supplied, there would either be a lock out or strike and there would be no sports for the season. In the past 10 years, the NFL (national football league) has not had a single strike or lockout due to the collective bargaining agreement struck between the NFL and the players’ union in 1993 and it has been renewed five times since then.

A recent example of collective bargaining is the announcement by Mr. Brian Angus of The Steel and Engineering Industries Federation of South Africa (SEIFSA) that they had agreed to six month’s maternity leave bring paid to female employees. The same will come in to effect in Australia too from 1st of January, 2011 as the government looks to help the female community.

A collective bargaining agreement was also reached between General Motors Corporation (one of the world’s leading automobile manufacturers) and the united auto workers in 2007. The agreement ended the strike by 73000 workers at 80 facilities across 30 locations in the United States.

There have been many collective bargaining agreements at Volkswagen. In 1993, there was an agreement on the so called 4 day week or 28.8 hours a week. In 2004, another agreement stipulated a pay freeze till 2007 and a worker would get overtime pay only if he worked more than 40 hours a week. In 2006, another collective bargaining agreement extended the weekly working time to 33 hours a week.

Abstract/ Executive Summary

This report is based on Trade Unions and Collective Bargaining. The report begins by explaining what trade unions are, why workers join trade unions and the benefits of trade unions to employers, employees and the society. The report then explains what trade unions are and their relevance in the modern workplace. The various collective bargaining issues with examples are highlighted and they have been classified in to three categories. The report also highlights the benefits and challenges of collective bargaining.

The report then talks about the two faces of trade unions. There has been a widespread debate about the working of trade unions – the monopoly face and the collective voice/ institutional response face. A few examples have also been given.

In short, the main objective of the report is to show how trade unions collectively bargain for the benefit of workers.