Elasticity of demand for labor is determined by how responsive labor demand is to the wage rates in the market. When the demand for labor is high, wages tend to decline, and vice versa. It is observed that when the demand for labor declines the bargaining power declines. Employers tend to offer low wages when there is large number of people available to take up employment opportunities. The rate of wages, in such a case is solely determined by the availability of labor (Boeri & Ours, 2009).
However, labor unions have established measures to curb this practice among employers. When labor unions become weak in bargaining for better wages, employers tend to fix their own wages rates. Therefore, it is evident that the elasticity of demand for labor influences bargaining power. Trade unions usually ignore the tradeoff between wages and employment as a measure to ensure employees are paid better wages even when demand is low. Elasticity of demand really matters in the activities of labor unions because it is used to determine regulatory measures required to ensure employers provide better wages even when labor demand is low. For example, the US government introduced the Equal Employment Opportunity Commission to regulate the wages offered by employers (Boeri & Ours, 2009).
For a strike to be successful, it is important that all legal provisions in a certain jurisdiction be adhered to. Various governments have restrictions on strikes such that employees are not allowed to strike. The US government established the National Labor relations Act and in these laws strikes are permitted. However, employees in industries which may national emergency are not allowed to strike. For example, the police units and firefighters are not allowed to strike. In addition, the cooperation of employees during a strike makes it successful or not (Caponigro, 1999).
When sub groups among the employees emerge and they oppose each other, the strike might not be successful. The labor union leaders must unite all employees so that they can fight for common rights. Unity among all labor union members is important in making a strike successful. It is also important to note that the labor union leaders have a great influence on the success of a strike. When the leaders accept to be compromised by the employers, they may tend to oppose a strike taking place in an organization. In some cases, the labor union leaders are invited for negotiation by the employer to avoid the occurrence of a strike. In such a case, when the leaders accept the terms of the employer, they may end up calling off the strike (Caponigro, 1999).
Membership of labor unions in the US had assumed an upward trend from 1930’s up to 1950’s, such that about 35% of the work force was unionized. However, the trend declined since then and today, less than 12% of the workforce is unionized (Friedman, 2008). The causes of the decline were: shift from agriculture to industrial systems such that employees changed their culture and became civilized. Change in political systems also caused these trends. The economy of the country grew faster and the living standards of workers were improved. This caused many workers to avoid strikes because it could destabilize their livelihood. On the other hand, in Canada, industrialization did not pick up at a higher rate compared to the US. This has made many workers to remain in the agricultural sector; hence they form unions to have a common labor culture (Friedman, 2008).
The political systems in Canada have been accepted the establishment of unions in the country and this has brought about massive increment of labor unions. In addition, the economic stability of Canada has not been growing too fast and the workers are forced to develop labor unions to ensure they get better wages for better living standards. Globalization has also brought the need for more labor unions in the country because workers are becoming aware of their rights by interacting with other people in other parts of the world. The growth trends of labor unions in Canada are predicted to continue because there few changes taking place in the economy (Friedman, 2008).
The bargaining power of employees is determining by several factors, and one of them is the diversity in an organization. This means that when employees have diversified careers, they are able to control the activities of an organization. In addition, the number of employees in a specific area of operation determines the bargaining power. As such, when employees in a certain area of operation are many, they have the power to demand better employment terms (Ackers & Wilkinson, 2003).
The case of Plant A and Plant B provides that, in Plant A there are no other plants working in Company A. on the other hand, in Plant B, the workers have employees from other plants within the company. This difference in the number of plants present in Company A and B is the one which gives employees in Plant B a better position in terms of bargaining power. Diversity in an organization provides employees with synergy to bargain for better employment terms. It is also evident that, in Plant B, the employees work in different plants and this means that it not possible for the management to control the decisions they make about improving the terms of employment. When employees work in different work stations, it becomes impossible to regulate the decisions they make. However, when employees are centralized, it becomes easier to have more control on the ideas they develop (Ackers & Wilkinson, 2003).
In the last ten years, many strikes have occurred in the US. For example, in the year 2005, there was a strike in New York City. The strike had been launched by Transport Workers Union Local on December 20, 2005. Employees in the transport industry had complained about the low wages, retirement and pension benefits. There was a need for the employees to have an increment on their benefits and this idea had been negated by their employer. Many commuters were affected because it was impossible to move from one area to another (Brenner, Day & Ness, 2009).
A general explanations of strike occurrence is that, when employees are not satisfied by the employment conditions, they seek was of exposing their grievances. Such grievances if not solved may cause total halt on the activities of the organization. As such, strikes occur when the employees and their employers fail to agree on the work conditions and terms of employment (Brenner, Day & Ness, 2009). In the case of the strike explained above, the strike occurred because the Metropolitan Transport Authority failed to satisfy the needs of the employees. The employees were claiming for higher wages and other benefits but the authority never complied with the demands of the employees. This misunderstanding caused the employees to go on strike because they were feeling oppressed by the authority (Brenner, Day & Ness, 2009).
It is my perfect believe that unionism gives public employees excessive power compared to private employees. Collective bargaining in the public sector is different from the private sector in that, collective bargaining in the public sector is not controlled by the consumer demand. In the private sector, changing the wages has an impact on the prices of products being offered in the market. Private employers obtain income to pay employees from the products they offer to the market. If the private employers would wish to increase the salary of employees, they must increase the prices of products. On the other hand, employers in the public sector are paid from the taxes levied on the tax payers. Thus, in the public employment, there are no forces of the customer which determine the wages paid to employees (Munk, 1998).
I would prefer to be a member of the public sector, because the wages are easy to bargain than in the private sector. In addition, the changes in the wages in the public sector do not affect product prices in the market. In addition, in the public sector the government has more control than in the private sector. Therefore, it is very easy for the government to intervene in the public sector than in the private sector (Munk, 1998).
Unionism gives public employees have excess bargaining power if they have the right to form unions and to strike. This power is drawn from the fact that, employees in the public sector get their wages from the taxes paid by tax payers. They wages are not obtained from the sales of goods or services. Thus, changes in their wages are not affected by the customer demand. In the private sector, employees get their wages from the products sold to the customers. As such, they must consider the effects of demanding for more wages because this may affect consumer demand (Munk, 1998). Excessive increase on the wages of employees in the private sector can cause an increase in the prices offered to the customers. This will eventually affect the consumer demand. Eventually, this may lead to the collapse of the business entity. Therefore, employees in the private sector tend to have less bargaining power compared to the employees in the public sector (Munk, 1998).
Contrary to the opinion given by Professors Wellington and Winter, I consider the private unions having more bargaining power than the public unions. The private sector profit oriented and focuses on the wellbeing of all its stakeholders. It is very possible for labor unions in the private sector to have more power because the employers aim at getting better services. On the contrary, in the public sector, the employer is not concerned about the quality of services offered and the welfare of the stakeholders is not considered. This makes the private sector to develop stronger unions than the public sector.
Supposing I was to testify before the Commission on the future of worker-management relations, I would have recommended that unions in the public sector should be given lesser powers. The public unions have created more burdens to the tax payers by demanding better payments. This has made the tax payers to pay more taxes. If the public unions can have less bargaining powers, they can make the tax payers pay fewer taxes. Tax payers feel oppressed by the increasing demands of the employees in the public sector and this is causing a lot of public outcry. As such, the tax payers feel overburdened because the public employees are demanding more wages which are not commensurate with the quality and quantity of services they offer.
I would also recommend that, the unions in the private sector should not be granted more bargaining powers. These unions have a direct impact on the economic variables, such as price changes and consumer demand. If granted excess power, these unions may cause bankruptcy of private companies. It is observed that when the private unions demand more wages, they cause an in increase in the prices offered in the market. it is therefore, very important to control the power of the private unions.
Macroeconomic performance is affected by industrial relations in a number of ways. First, the structural systems of an economy are determined by the relationship between labor unions and macroeconomic variables, such as employment. Secondly, the socio-economic systems are affected by industrial relations. This effect is experienced when labor unions are used as tool of social change. Lastly, industrial relations affect the political systems in an economy. As such, labor unionists use politics to deliver their agendas (Biagi, 2001).
An empirical test on one of the ways in which industrial relations exerts such effects is a case whereby, labor unions are used by politicians to acquire their political ambitions. Politicians have, in the past, used labor unions as agents to deliver their political aspirations. Based on my own knowledge of comparative industrial relations, the extent to which industrial relations affect macroeconomic performance is large. Industrial relations affect macroeconomic variables by changing the political, economic and social systems. The activities of labor unions affect the output of employees by improving their level of motivation. The level of satisfaction that employees have is determined to a great extent, by the amount of wages they get. Therefore, it can be said that when unions fight for better terms of employment, the employees provide better output. This improves the Gross Domestic Product of a country (Biagi, 2001).
It is also important to note that the tax rate is affected by industrial relations. In this regard, public unions have more power to control the wages provided to employees. The wages paid to public employees is derived from the taxes paid in an economy. Thus, it can be said that industrial relations affects the tax system of an economy. Additionally, the macroeconomic policies developed by a government are regulated by labor unions. For example, policies concerning poverty eradication, employment and unemployment among other macroeconomic issues, are developed in consultation with labor unions. The private sector also has a stake on the macroeconomic activities of a country. As such, the decisions made by the government should be done in consultation with all stakeholders in both, the private and public union sectors (Martin, 1992).
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