How Unions Affect Company Productivity
Professor Chris D’Mello
AMBA 600 Section 9062 Semester 1109
How Unions Affect Company Productivity Introduction
Employees and their employers seem to approach the issue of employment from very different perspectives. This fact often leads many people to ask; “how can these sides that are expected to work hand-in-hand reach any sort of agreement?” The answer to this common question lies in unions. It has been proved that for centuries, unions have played a significant role in the employee-employer dialogue, but in past few decades, various aspects of business and working environments have significantly changed. For this reason, it is imperative to understand how unionism, fit into the transformed business and working environment, and what roles do unions play in the present-day economy, especially how they impact organizations productivity. What are unions?
According to Perlman (2010), a union is an organization that is comprised of employees drawn from various departments or sectors of an organization whose main aim is to negotiate with organizations, businesses and other corporations on behalf of union members. It is imperative to understand that there are different entities of unions such as trade unions, which negotiate on behalf of employees who do a particular type of job and industrial unions, which negotiate on behalf of employees in a particular industry. Good examples of trade and industrial unions are the American Federation of Labor Congress of Industrial Organization and the United Auto Workers respectively. As stated earlier, unions play a vital role in the dialogue between the employer and employees. Since the industrial revolution, they have been lauded for ensuring improvements in wages and working conditions for employees. Most unions were founded in resource and manufacturing companies, mines and textile factories, and companies that operated steel mills, but with time, they spread into other industries. How unions affect company productivity
The power of unions, in regards to their impact on productivity rests in their two principal instruments of influence, increasing labor demand and confining labor supply. It has been established that unions can impact company productivity both positively and negatively. Recent studies have established a strong correlation between unionization and productivity. In the United States, for example, it was established that there was a strong association between unions and high productivity in the education and manufacturing sectors, of approximately 7 and 10 percent respectively (Brown & Medoff, 2005). Another study that aimed to establish the relationship between unionization and product quality in the Automobile industry established that unionized advisors showed greater levels of communication and lateral communication as compared to non-represented advisors. As a result, the unionization among advisors had positive impact on quality performance. Through collective bargain, unions are able to successively negotiate what wages employees will be paid by the employer. It goes without saying that improved remunerations go hand-in-hand with improved productivity due to employee motivation. Normally, unions usually negotiate for hire wages than the equilibrium wage. In most cases, this ends up lowering the number of hours demanded by employees. However, unions often encounter obstacles when negotiating for higher wages because a higher wage rate leads to less work per dollar. When faced with this challenge, unions often shift their attention on increasing the demand for labor (Brown & Medoff, 2005). To ensure that the demand for labor is increased, unions often employ different tactics. It is imperative to understand that these tactics impact...
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Brown, C & Medoff, J. (2005). Trade unions in the production process. Journal of Political Economy. 86 (3): 350-380
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