Introduction

The orthodox view of monopoly trade unions is that they achieve a monopoly wage gain at the expense of one or more parties: nonunion workers who may receive lower wages; consumers if the cost increases can be passed on in the form of higher prices; or capitalists whose profits may be reduced. We saw in chapter 3 that a necessary condition for wage gains is the existence of economic rents in the product market. It was also argued that in order for a union to achieve wage gains, it must have the necessary power to force the firm to share the surplus. Alternatively, the firm must be willing to share any surplus with the union in exchange for higher productivity.

The latter view – that unions may be associated with productivity increases – is the focus of the first part of this chapter. While the monopoly ‘face’ of trade unions focuses on the negative aspects of unionism, an alternative view of unions is that in some circumstances they may be efficiency-enhancing, in the sense that the presence of a union may result in improvements in the organisation of the workplace and the productivity of the workforce. How does this improved productivity come about? There are two popular views in the literature, both of which can be placed under the broad heading of organisation theories, since unionisation may affect organisation of production and workers' incentives.