The Role and Importance of Trade Unions Essay Example

  • Category:
  • Document type:
  • Level:
  • Page:
  • Words:

4Trade unions

The Role and Importance of Trade Unions


The Australian Council of Trade Unions (ACTU) (1999) defines trade unions as organization of laborers whose main objective is negotiation for pay and other work conditions for its members. Labor unions are always thought of as interest groups of workers who are in pursuant to their own interests. ACTU (2001) indicates that Australia has experienced a dramatic decline in trade unions as they are losing their relevance in the society. It is this decline that is interpreted as a loss of necessity and importance in current industrial relations. Workers themselves have abandoned the unions worsening the hold on to validity of these unions. Hayek (1960) notes; economists are of the opinion that liberalization of markets is efficient in maintenance of good labor relations. They argue that trade unions are hindrances of successful labor relation. Trade unions are seen as posing inflexibility in wages, market and employee free choice. In this way there is great reduction in economic achievement of the organization or industry concerned.

Trade unions are viewed as the most effective mode of organization structure that achieves the economic power for the employee in the capitalist system. Secondly, trade unions accord the employee the political power in democratic systems through which collective decisions of industrial actions are made. This document will alienate the anti-trade unionist arguments by emphasizing on the economic and political benefits of trade unions to the employee. The essay will elaborate on the above mentioned dimensions and provide other aspects in which trade unions are of importance to reinforce the necessity of trade unions in labor relations.

Economic power

Workers are disadvantaged when it comes to bargaining for their rights. They have few options in a situation in which the party with the most options always wins. The employers are advantaged by the number of potential employees at their disposal and as such have a higher bargaining power compared to the labor force. Heery, and Abbott, (2000) indicate that the employees have few employers at their disposal and would feel the impact of being fired more than the employers feel when they fire an employee. It is this imbalance in economic power that necessitates the existence of trade unions in Australians labor relations.

Unions are used to resolve the economic inequity by enforcing an equality veneer for employees to bargain over the work contract with the employers. Ballarino, (2002) notes that strong unions sway the economic power to the employees forcing the employers to make collective contracts with the labor force. In this way the employees have leverage as the employers have to make collective agreement or face the challenge of a shrunk labor market. Trade unions give the employees the capacity to hold their employers responsible for unsatisfactory contract by a collective withdrawal of labor in what is called in labor relations terms “strike” (Creighton, & Stewart, 2000). Collectively withdrawing labor give workers more bargaining power and restore the economic balance between employers and employee.

Political power

According to Burgess and Macdonald (2003), trade unions are of significant importance when it comes to ensuring democracy in European states. Isolation of an individual party to trade unions makes them passive and ineffective in labor relations politics. This continues to develop a radicalized ignorance of labor issues, a fact which further complicates in the susceptibility of employees to the employers manipulation. Through trade unions, a sense of solidarity and civic obligation which advocates for political activity.

Labor unions encourage participation by developing a commonality in their members. According to Strauss (2006), Unions are advantageous over other modes of achieving solidarity because they enhance the already existing workplace solidarity. Through the solidarity, the quest for solutions to work place conflicts is turned from individual struggles to collective problems. The workplace is already a cooperative community in which the employees interact.

Education is of critical importance to the success of trade unions, the development of a democratic front depends on the level of knowledge the members of the trade union have of their legal rights as concerns work place relations. Through the informative role played by trade unions, workers ignorance is eradicated (Campbell, 2001). Through knowledge employees are also made aware of the participatory processes they can use in their respective trade unions. With this in mind trade unions have continuously been making efforts to educate their members on the legality of the trade union’s operation. The employers benefit from these efforts by getting better educated employees who are more confident. However, this becomes challenging to the management who still are rooted to the traditional paternalistic master-servant relationship.

The extent of employee participation in union activities has however not been linked to increases in overall performance of the organization to which they belong (Strauss, 2006). According to Markey and Townsend (2013), researchers have indicated great variance in the relationship of employee voice to employee performance most of which have not been positively indicated. Labor unions are found to have increased retention as a consequence of increased employee satisfaction. Effective trade unions are found to be demonstrations of higher performances in management and lower employee turnover (Sablok, Bartram, Stanton, 2013). In comparison, workplaces with low employee participation and representation have lower satisfaction and overall increase in employee turnover (Owens, 2002). It is therefore obvious that by increasing participation and engagement in work relation issues, reducing the management hindrances to employee voices, trade unions have the advantage of increasing performance of employees at work. In Wilkinson et al 2004, it is noted that the value an employer attaches to employees opinions affect the attitudes, behavior, loyalty and commitment to the organization. This has the catalytic effect of increasing productivity at work by lowering absenteeism. According to Frege and Kelly (2003), the strategy also increases employee cooperation on management issues and this further enhances the input towards managerial operation.

Opposing perspective to the argument as to whether trade unions are still necessary is jubilant on the lowering trend of union membership. There has been a drastic fall on the union membership and in the case of Australia; the plateau nature of very recent trend is relieve to union bosses. Points put forward to antagonize the trade unions are: the high rate of unemployment or temporary employment that results when trade unions push for better work conditions while in effect minimizing the number of employees taken in (Broughton, 2003). Secondly the high wages demanded for by trade unions are primarily paid for from profits. A large percentage of public earnings are derived from wages while only 6% are from profits (ACIRRT [Australian Centre for Industrial Relations Research and Training] 1999). This allows minimal space to increase wages by deducting profits. Profits are also intended to be reinvested to increase the capital of companies, using up profits to pay wages would therefore mean there is no growth and consequently there would be no source of wages or creation of new employment opportunities. Thirdly higher wages would increase the cost of business operation which causes a chain reaction of increase in prices.

This argument is however countered by economists such as Robert Murphy (2002) who suggests that an increase in labor will lead to increases in purchases of alternative goods. In effect wage increases are transferred to the consumers and so the profit margins remain the same. The purchasing power of the consumers is compromised and alternate goods whose prices have not soared are consumed more. These arguments are of no economic basis considering the immense increase in productivity that is caused by higher wages advocated for by trade unions. Unions are effective in increasing productivity and reducing labor turnover, increasing employee satisfaction and motivation. The aforementioned effects of trade union suffice countering the decrease in profits by increasing productivity and making up for the difference. About heightening inflation, it should be noted that union members spend the higher wages in the same economic system. This creates new employment opportunities and higher profits for other industries by increasing the purchasing power of the unionized members.

In conclusion, trade unions are of great necessity and importance to both the employees and the employers. Trade unions are avenues for workers to liberate themselves from exclusion by employers. Through unions workers are able to present their voice and ensure that their demands are meant by their employers. The benefits to employees are higher motivation, higher job satisfaction and higher level of participation in managerial issues. To the employer trade unions are beneficial because a motivated labor force has higher retention and productivity which amounts to higher profits. The management will also have a good interface through which to address their workers complaints.

Antagonistic ideologies pose that trade union activity has the ripple effect of causing inflation and reducing the purchasing power of non unionized members. They further argue that the high wages demanded for cannot be accommodated for in the national income. These are vague arguments considering that when employers pay the wages demanded they experience a positive shift in productivity that amounts to increased profits. For this reasons I strongly propose that trade unions are necessary for the Australian labor relations.


ACTU [Australian Council of Trade Unions] (1999)[email protected], Melbourne, ACTU

ACTU [Australian Council of Trade Unions] (2001) Our Future at Work: A Union

blueprint for Fairness, Melbourne, ACTU.

ACIRRT [Australian Centre for Industrial Relations Research and Training] (1999)

Regulating non-standard employment in manufacturing: Summary Report, Sydney,

Ballarino, G. (2002) New Forms of Employment and Collective Bargaining: Unions and

Atypical Workers in Lombardy, Paper for the 2002 SASE Conference,


Broughton, A. (2003) ‘Council fails to agree on temporary agency work Directive’,

Eironline, June.

Burgess J. and Macdonald D. eds.,(2003) Developments in Enterprise Bargaining in Australia, Croydon, Tertiary Press, 33-49.

Campbell, I (2001) ‘Casual Employees and the Training Deficit: Exploring Employer Calculations and Choices’, International Journal of Employment Studies, 9 (1),

Creighton, B. and Stewart, A. (2000) Labour Law: An Introduction, 3rd ed., Sydney, The

Federation Press

Frege, C. and Kelly, J. (2003) ‘Union Revitalization Strategies in Comparative

Perspective’, European Journal of Industrial Relations 9 (1), 7-24

Hayek F. A., (1960) The Constitution of Liberty, Routledge Classics

Heery, E. and Abbott, B. (2000) ‘Trade unions and the insecure workforce’, in E. Heery

and J. Salmon eds., The Insecure Workforce, London, Routledge, 155-180.

Markey R. and Townsend K, (2013) ‘Contemporary trends in employee involvement and participation’,
Journal of Industrial Relations, 0(0) 1–13

Owens, R. (2002) ‘Decent Work for the Contingent Workforce in the New Economy’,

Australian Journal of Labour Law 15 (3), 209-234

Robert P. Murphy (2002). «Can Unions Cause Price Inflation? – Robert P. Murphy – Mises Institute«.

Sablok G, Bartram T, Stanton P, et al. (2013), ‘The impact of union presence and strategic

human resource management on employee voice in multinational enterprises in Australia’. Journal of Industrial Relations 55(4).

Strauss G (2006) ‘Worker participation – Some under-considered issues’. Industrial Relations:

A Journal of Economy and Society 45(4): 778–803

Wilkinson A, Dundon T, Marchington M, et al. (2004) Changing patterns of employee voice: Case studies from the UK and the Republic of Ireland. Journal of Industrial

Relations 46(3): 298–322.