Labor unions are legally recognized bodies that work for the rights and demands of the employees or workers. The United States has had a long history of labor unions which began in 1790.
Labor unions are formed so that a large number of employees can come together and lobby for negotiating work rights and employee benefits with the employer. The major regulation institutions for labor unions are ALF-CIO, Change to Win Federation, and NLRA. These organizations work continuously to protect the workers and even the employers by making various policies and regulations.
Labor unions are very commonly found in the public sector units. For example, police, teachers, doctors, etc. A Labor Union uses collective bargaining for making negotiations on wages, work conditions, and employee benefits.
A firm's productivity is increased because of other positive factors like, reduced employee turnover, contentment within the employees, higher wage rate, etc.
Reduces Employee Attrition
With the help of labor unions, employees are able to achieve desired wages, good working environment and the right to work. When the employees are happy with their work, the attrition rate will definitely reduce.
Few studies on the labor unions have indicated that they create equality between men and women - wages, work environment and facilities. It also creates a sense of equality between employees at different levels of hierarchy.
Voice for the Labor Union
Labor unions act as the voice for the employees or workers. This is because labor unions fight for the employees rights and benefits and come together as one.
Collective bargaining is the power that the labor unions have, to resolve disputes and to attain employee rights by demanding collectively as a group. A single employee's demand would probably not catch attention, but a group of employees together can definitely make their demands heard and also attain them. It is based on the moral of, "United we stand; divided we fall".
The employees can attain higher wages than in the wage market using collective bargaining. If their demands are not met, the Labor Union will use going on a strike as the last resort to fulfill their demands.
Benefits here would indicate, hours of work, work environment, incentives, overtime pay, compensation for loss, holidays, insurance, provident fees, and paternity and maternity leaves.
The labor unions can come together and can make resolutions in which an employee's employment and termination will follow a set of rules.
Better working Environment
With positive attributes like higher wage rate, gender equality, right to be heard, etc automatically makes up a better working environment.
High Union Fees
The fees charged by the Labor Union can be very high. And, therefore can prove to be a zero return investment. Many companies have their policies and regulations made in such a way that the workers' rights, working environment and other factors are already structured in a way that is beneficial and favoring the employees. In such a case, having a Labor Union becomes an increased cost.
Threat of Strikes
Labor unions to get their demands met can go on a strike till their demands are, therefore, the employer will always have to be wary of employees going on a strike and disrupting the firm's business activities. It is an exploitation of the employer in case the Labor Union's demands are not rational.
Labor unions can lead to unproductive-ness because when the workers go on a strike the economic activities of the firm come to a standstill. Also, if the workers are not happy as their demands are not met with, they will not work efficiently, thus lowering the productivity of the firm.
Increased Business Costs
Higher wage rates and benefits attained by the labor unions can prove to be increased business cost, if the labor inputs do not equal or exceed the cost incurred to hire them.
The Labor Union can make demands and enforce them by threatening the employer. The union before making demands can also make demands without thinking about its effect on others and the employee.
If the labor unions bargain for a higher wage, then it can lead to unemployment. This is because of the 'wage curve'. The wages of the employees are inversely related to the number of people employed. Which means that if the wages are increased, that will be at the cost of others' employment and if the company wants to employ more people it will reduce the current wages of the employees.
Difficulty in Getting Promotions
Labor unions and the management or the employer work as opposition parties. Therefore, the management team will not prefer anyone from the Labor Union team to be a part of their team. This could be because that person could be biased towards the well-being of the workers, distorting the management's decisions. Therefore, those who are a member of the Labor Union team find difficulty in getting promoted.
Other Employees Don't Have the Power of Voice
Only the demands of the members of the Labor Union are addressed to. Other employees' demands do not get the voice and the collective bargaining to be heard.
Under the current laws (Employee Free Choice Act) the private ballot election has now been prohibited. Instead the employees now have to use the 'card check system'. In this system, for the government to certify a union, more than 50% of the employees sign the card for the same. The current law is more favorable for the unions and harsh for the employers. After the union is certified the employer and the employee have to come to an agreement in 120 days after which the case will go to a panel of government arbitrators. Names like Jimmy Hoffa and Eugene V. Debs are the most known Labor Union leaders. The son of Jimmy Hoffa, James Hoffa is the Labor Union president of Teamsters, following his father's footsteps.
Labor unions have many advantages if their power and authority is used in the right way. If they are using their powers by demanding more than what they deserve, then the unrest in the union and the employees can actually slowdown the production process and can even bring it to a stand still. The Labor Union leaders are very influential and have a strong say too. If the leader is fair and just then the employees will benefit and so will the employer as all the employees are content and happy which in turn increases the productivity and lowers the employee attrition rate. So, to sum up, the efficiency of a Labor Union lies on the Labor Union leader.