Introduction

The standard view of trade unions is that they are organisations whose purpose is to improve the material welfare of members, principally by raising wages above the competitive wage level. There is little dispute that unions are frequently able to push wages above the competitive level – what is called the ‘monopoly’ role of trade unions. There is an enormous body of literature documenting the impact of unionism on wage gains, some of which we will be examining in chapter 6. There is also a somewhat smaller body of literature examining the impact of unionism on other variables, such as wage dispersion, productivity, profitability, investment and employment, some of which we will consider in chapter 7. All of this literature is focused on finding an answer to the important question: what do unions do? However, there are many other interesting questions about trade unions that remain unanswered in most of the literature; for example, how do unions gain the power to obtain these wage increases? Under what conditions is the union able to raise wages above the nonunionised wage rate? What factors determine the magnitude of the union wage effect? Why do unions exist? In what circumstances might management acquiesce in the formation of a union or agree to recognise a union?

The first part of this chapter provides an overview of the trade union within the framework of competitive labour and product markets.