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What is a Labor Union?

Robinhood LearnJuly 3, 2020
Democratize finance for all. Our writers’ work has appeared in The Wall Street Journal, Forbes, the Chicago Tribune, Quartz, the San Francisco Chronicle, and more.
definition

A labor union is a group that represents the interest of a company’s employees or a specific group of workers, such as construction workers or plumbers.

🤔 Understanding a Labor Union

Labor unions are groups that negotiate on behalf of a company’s employees or a group of people who perform a similar job. By negotiating for a large group, labor unions can negotiate more effectively than individual workers. Typically, labor unions negotiate regarding things such as pay, benefits, working hours, and working conditions. Most labor unions cover blue-collar and public workers rather than white-collar employees. Overall union membership has decreased since the 1980s. Large labor unions often do more than negotiate with the companies that employ their members. In addition to representing workers in negotiations, they lobby for new government regulations that they believe will benefit their membership.

example

One example of a labor union is the Harvard Union of Clerical and Technical Workers. The union represents employees of Harvard University who work in roles such as administration and computer support. The union negotiates with the University and agrees to contracts outlining pay grades, annual raises, vacation time, health benefits, and retirement plans for its members.

Takeaway

Labor unions are like when two siblings work together to ask their parents to buy something…

If a child wants his parents to buy a new video game, he has to ask his parents and hope that his parents agree. If he asks his sister if she wants the game and they both ask their parents, it can lend extra strength to their request. In the same way, labor unions let employees ask for things as a group rather than individually, increasing the odds that the company agrees.

Tell me more...

What is a Labor Union?
What are some examples of labor unions?
What is the purpose of labor unions?
What is the history of labor unions?
What are the goals and objectives of labor unions?
How does a labor union work?
What are the benefits of being a union member?
Are there disadvantages to being a union member?

What is a Labor Union?

A labor union is an organization that represents the interests of a group of workers. When a business hires an individual, they negotiate things like salary, benefits, vacation time, and working conditions. Because individual workers don’t have as much power as the business, it can be difficult for them to negotiate effectively.

Many employees can group together and form a union, empowering the union to negotiate on their behalf. Because the union represents many workers, it increases those workers’ bargaining power and can help them get more from their employer.

There are many different unions, each representing different groups. Some are small, representing just the employees of a single organization or a type of workers in a region. For example, the Boston College Graduate Employees Union represents only graduate students, researchers, and teaching assistants who work at Boston College. The United Auto Workers is an international union representing more than 400,000 workers across a variety of industries.

Some unions go beyond negotiating with employers by lobbying local, state, and national governments. They campaign in favor of candidates that support unions and issues that impact their members.

What are some examples of labor unions?

One example of a labor union is the Major League Baseball Players Association. The union represents players employed by teams in Major League Baseball. While each player can negotiate the terms of their contracts with their clubs, the MLBPA negotiates with Major League Baseball to devise a collective bargaining agreement (CBA).

The CBA outlines things like the minimum wage a player can receive, the schedule for the season, and rules for free agency. This lets the MLBPA negotiate to ensure specific conditions for its players while giving individuals some freedom to arrange their own contracts.

Another example of a labor union is the International Brotherhood of Teamsters, which represents a variety of blue-collar workers, including freight drivers, warehouse workers, sanitation workers, and construction workers. The union negotiates pay rates, benefits, and workplace conditions for its members.

What is the purpose of labor unions?

The goal of labor unions is to bring more negotiating power to the table than an individual employee could.

When a single worker negotiates with their employer, they do not have much power. In most situations, especially in industries that rely on unskilled labor, it is easy for the company to replace individual employees. Because the potential labor pool is large and onboarding costs are low, the employer can easily set the terms of employment. Any worker asking for additional compensation or better benefits is unlikely to receive them because they lack negotiating power.

If many workers form a union, they gain more negotiating power because it’s more difficult for the employer to replace many workers at once. Replacing one employee may take a few days, but replacing hundreds could take far longer — if it’s possible at all. The threat of a large-scale or long-term impact on the business and its profits from a group of disgruntled employees gives the union more power to demand an increase in wages and benefits or better working conditions.

During particularly tense situations, unions may go on strike. When this happens, the union’s members refuse to go to work and often demonstrate outside of their usual place of work. This can bring bad publicity to the employer and also cause a slowdown or stoppage for the business. The threat of this kind of action gives even more negotiating strength to the union.

What is the history of labor unions?

In North America, labor unions have their origins in the late 18th century craftsmen. Journeymen worked for master artisans but began to strike out on their own. They discovered that it was easy for other laborers to undercut their prices and realized that collective action helped them maintain set costs for services.

The first strike occurred in 1768 when New York City tailors stopped work in response to proposed pay cuts from their employers. Philadelphia saw the first labor union form in 1794 with the beginning of the Federal Society of Journeymen Cordwainers. In 1827, the Mechanics’ Union of Trade Societies united many of the labor groups in Philadelphia.

In the American West, the Industrial Workers of the World tried to combine labor union negotiation with employers and political action. Many of its goals aligned with socialist thought, and the IWW led many strikes in the mining industry during the early 1900s. The American government suppressed it and its membership during World War I, which led to its fall from power.

With the onset of the Great Depression, unions became more popular and more powerful. The New Deal met many of the demands of organized labor, and the 1933 National Industrial Recovery Act legally protected the rights of workers to unionize. Those rights were strengthened in the Wagner Act two years later, which also established the National Labor Relations Board (NLRB).

This gave workers the power to unionize. It also brought much of the unionization process under the oversight of the government and the NLRB. Over the next few years, many of the aspects of work that we take for granted today: pay equity, benefits for seniority, uniform working hours, and a process for raising grievances with your employer, came into place.

By 1950, at least a third of non-agricultural workers in both the US and Canada belonged to a union.

Unions began to lose power in the 1960s. Increasing foreign competition combined with government deregulation eroded much of the negotiating power that unions commanded. The American economy also began to shift away from unionized industries, such as metal and mining, and into a service-based economy, where unions were rarer and less powerful. Union membership fell by 4 million between 1975 and 1984, dropping it from 28.4% of the workforce to less than 20%.

Since the 1980s, union membership has continued to fall, dropping to 11.1% in 2015.

What are the goals and objectives of labor unions?

The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) states that it has a single goal: “a better life for working people.”

It outlines a few policy goals, including:

  • Trade deals that benefit workers
  • Increasing wages beyond the legal minimum
  • Giving workers a voice in their workplace

Unions can accomplish these objectives in a few ways.

One is direct negotiation with employers. Unions negotiate and sign contracts with corporations, outlining pay scales for their employees, access to benefits like pensions, 401(k) plans, and insurance, and specifying the conditions of the workplace.

Another is through political action. Major unions, like the AFL-CIO, directly lobby politicians, tracking how they vote and encouraging their members and those sympathetic to the union to vote in a particular way.

For example, the AFL-CIO publishes legislator scorecards, rating senators, and representatives on a 0 to 100 scale based on their voting records.

How does a labor union work?

A union starts with employees who want to work together as a group and organize. Workers can decide if they wish to form a union or continue to negotiate individually. If a group of employees wants to unionize, the process can proceed in one of two ways.

First, an employer can choose to recognize the union and begin negotiations voluntarily. Typically, employers may do this if there is a significant and clear majority of workers who want to unionize.

If the employer does not voluntarily recognize the union, organizers must get 30% of employees to sign a union authorization card. After meeting that threshold, the National Labor Relations Board (NLRB) organizes a vote. If the majority of voters wish to unionize, the NLRB certifies the union as the employees’ representative for negotiating, and the employer must recognize the union.

Workers have the right to unionize, though employers can take some steps to discourage unionization. However, employers can’t fire organizers or threaten them with violence. Similarly, union promoters cannot make threats against those who don’t want to join.

After the NLRB certifies a union, its representatives meet with the employer to negotiate a contract. After negotiators agree on a deal, potential members vote to approve or deny the agreement.

Contracts typically last for a few years, after which the union and the employer negotiate a new agreement. This is the opportunity for both sides to make changes to the contract. Between contract negotiations, union representatives still assist members, helping them raise issues to their employer or mediating disputes between managers and workers.

What are the benefits of being a union member?

Labor unions provide a variety of benefits to their members.

One is collective bargaining. Union members do not need to negotiate as many of the terms of their employment as non-members. That can make the employment process less stressful and also produces more equitable results for people doing similar work — If you perform the same task as someone else with the same experience, you’re more likely to receive similar pay.

Union workers also tend to earn more than non-union members. People who are represented by a union make roughly 20% more than those who are not in a union within the same field. They also tend to receive more consistent pay increases and better benefits, such as insurance and retirement plans. Sixty-seven percent of unionized workers in the private sector receive a pension compared to 13% of non-union workers.

Another benefit is workplace safety. Union contracts outline conditions that their members can face in the workplace. Safety is often a priority in these contracts, so joining a union might help make your workplace become safer.

Are there disadvantages to being a union member?

Joining a union does bring some negatives to its members.

One drawback is a loss of flexibility. You have to abide by union rules and the contract your representatives negotiate. If you are willing to do work outside of the agreement, you can get in trouble with the union for doing so.

Another drawback is union dues. Unions need to pay for a variety of costs, such as distributing material and paying their administrative workers. Union members give a portion of each paycheck to their union to cover these costs. Paying union dues may also mean funding political lobbying with which you may or may not agree.

Some studies also indicate that union membership can make worker relationships with supervisors more adversarial and less collaborative.

Finally, many union contracts emphasize seniority over skills and results. Two people with identical job performance may receive very different pay if one has been employed for decades while the other started this year. The preference for seniority can also apply to things like eligibility for highly-valued vacation dates or promotions.

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