Trade Unions: Are the Good Old Days Gone?

Trade unions around the globe are struggling with low membership rate that stems from unfriendly legislation, governments’ determination to further their countries’ participation in globalisation, and a changing labour force. Without necessary changes, it will be a challenge for unions to stay influential in the future.

Trade unions around the world have seen better days. After decades of globalisation and structural transformation in world economies, many trade unions are suffering from historically low membership rates. They have to grapple with harsher labour laws under more conservative administrations, and lower awareness among the new generation of employees working in new work settings. Is the decline of labour unions irreversible?

The erosion of trade unions’ political clout is prominent even in countries where labour rights have historically been a priority. Although strong labour unions are still calling for boycotts and strikes on the national level, their unfruitful advocacy for higher wage and employment security, due to a shift of the priority from equality to development, are gaining less consideration. The diminishing impact of trade unions on politics does not help unions to appeal to the labour force, and to regain their traction by promoting membership. In September, Brazil’s highest labour court set a precedent by legalising the negotiation of labour contracts without the consent of unions. The verdict will drastically undermine unions’ bargaining power, as they will no longer be able to boycott undesirable labour contracts by sitting out the negotiation. Another blow followed closely as Brazilian President Michel Temer, taking over from labour-friendly former President Dilma Rousseff, announced possible labour laws in the future that are less stringent for employers.

To write off this series of bad headlines for trade unions in Brazil as the result of a changing administration would overlook what has become a trend in the region. Latin American countries are eagerly looking for new economic opportunities, for which a more business friendly environment with a less politically influential labour force is a prerequisite.

Decades of globalisation have undermined unions’ power and, sometimes, put labour rights at stake. It is widely agreed upon by economists that lower labour costs (including wages, greater freedom to hire and dismiss employees, lower expenditure on upgrading the working environment, etc.) contribute to a country’s comparative advantage in the international competition for investment and trade. Reductions in labour costs are, therefore, especially essential for developing countries that rely on labour intensive sectors such as large agricultural, natural resource and manufacturing industries. Globalisation has also lowered the standard for labour rights in some countries. Professor Ranko Shiraki Oliver argues in her 2011 paper, using the example of Mexico, that free trade agreements dilute the commitment of some countries to enforcing their previously strict labour laws. These countries have to lower their standard for labour rights to a more business-friendly level to participate in the global economy.

Unions in developed countries have not managed to escape such declines either, despite those countries’ reduced reliance on labour-intensive businesses. The typical work environment in these countries has shifted: mass manufacturing plants that helped to induce the realization of a “class consciousness” and united workers have become small, isolated offices that accommodate only a few employees. The new generation of white-collar employees no longer fits the traditional narrative of the “low-paid manual worker” that was once endorsed by trade unions. This has led to a lacklustre union participation rate, a figure especially significant in the private sector. According to the Department for Business Innovation & Skills of the United Kingdom, employees above 50 years old make up nearly 40% of all union membership. That number was only slightly above 20% two decades ago. Meanwhile, the percentage of young members in the union has fallen by almost half within the same time frame. Unions from Australia have not fared well either: union membership is now nearly one in 10 in the private sector. Young people in developed countries find trade unions less relevant to their needs, despite union leaders arguing that union members earn higher wages than non-members.

The most fundamental problem might be trade unions’ threat to productivity and economic development of the society as a whole. Higher labour cost drives away potential investment that could bring about numerous job opportunities potentially. Researchers from the London School of Economics used India as a case to show that a pro-worker industrial relationship can have an adverse impact on investment, employment, productivity, and poverty. Trade unions make it more difficult to dismiss employees, which disincentivises workers to raise their productivity. While trade unions advocate for workers’ benefits and work towards a smaller income gap, they can sometimes inadvertently limit the society’s total potential wealth and hurt workers. A simplified paradox is that workers themselves bear the brunt of strong labour influence that potentially drives away employment and investment.

In the pro-development age, employers are gaining so much bargaining power that the effort of trade unions seems to be a lost cause.  Many workers no longer believe that trade unions would be able to strive for their interests. High unemployment across the globe in the post-financial crisis era, especially the high youth unemployment in Europe, has rendered workers unwilling to risk their employment by participating in strikes and boycotts.

The good old days of strong organized labour movements are certainly gone, as will be the encouraging outlook for trade unions around the world if legislators continue to prioritise higher economic growth.  To garner wider membership and stay relevant in the future, unions have to devise new roles or new approaches to connect with the new types of labour force and legislative environment.