Understanding Trade Unions and Wage Increases: A Success Story and Debates

The role of trade unions in wage increases has been a topic of debate for decades. While some argue that unions can artificially boost wages, others maintain that such actions can lead to economic decline. This article will explore a successful case study of wage increases in the last ten years and the broader debates surrounding the role of trade unions in the workforce.

Successful Wage Increases in Europe: The Finnish Example

In Europe, specifically in Finland, trade unions have been remarkably effective in raising wages. Almost every job in Finland is covered by union contracts or collective bargaining agreements (CBAs), which are negotiated approximately every 1–3 years. These agreements often result in wage hikes and benefit workers both within and outside the union.

Finland’s CBA system is notably inclusive, as it covers all employers in a field regardless of their individual acceptance. This means that even non-union workers benefit from the negotiated terms. Similar systems exist in other Nordic countries, though they tend to be opt-in. In these cases, the system is still popular because it promotes fairness and stability.

The collective bargaining agreements in Finland and other Nordic countries ensure that the minimum wages and often non-minimum wages are raised through union action. This process helps to maintain a living wage for workers and ensures that their purchasing power remains strong.

The Risks and Debates Around Unionized Industries

While trade unions can effectively raise wages, there are also risks and criticisms associated with their actions. Some argue that unions can artificially raise wage levels in an industry by excluding non-union workers. This can create a monopoly of employees and stifle competition, which may lead to a decline in the industry over time.

According to the economist W.H. Hutt, the use of force or the threat of force by unions to exclude non-union workers can lead to job losses and economic decline. This phenomenon is known as the "Strike Threat System" and highlights the potential pitfalls of unions in the long term.

Another argument against the effectiveness of unions is that they try to circumvent the natural process of increasing wages through productivity improvements. Unions often create a monopsony in the labor market, reducing competition and potentially leading to higher wages without corresponding increases in productivity. This can be seen in the United States, where wages have historically been high, even before the rise of significant union influence.

Case Study: 32BJ/SEIU in New York City

Despite the criticisms, trade unions can also achieve tangible success in raising wages. A notable example is the 32BJ/SEIU union, which has successfully raised the wages of door men, elevator operators, handy men, and other workers in New York City apartment buildings. Through collective bargaining and negotiations, these unions have been able to secure fair wages and better working conditions for their members.

The success of 32BJ/SEIU in New York City demonstrates that under the right circumstances, trade unions can have a positive impact on the workforce. However, it's important to recognize that such successes often come with the risk of potential long-term economic consequences.

Conclusion

The role of trade unions in wage increases is complex and multifaceted. While they can help raise wages and improve working conditions, there are also risks associated with their actions. The success of unions like 32BJ/SEIU in raising wages in recent years highlights the importance of balance and negotiation. As these debates continue, it's crucial for policymakers, unions, and employers to consider the long-term impacts of unionization on both workers and industries.