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Antecedents of Decline in Trade Union Membership and Trade Union Density

Question:

'Trade Union Membership in Australia has Declined Significantly Since the 1980s.  As a result, Unions are becoming an Irrelevant Actor in Australian Employment Relations'.

Drawing on Academic Research and Commentary,  Provide a Response to this statement.  In framing your argument, Consider the Antecedents and Consequences of the Decline in Trade Union Membership and Trade Union Density.

In reconnoitring the factors that led to the emergence and fall of industrial labour in Australia, the present paper contends that support for unions initially surfaced from a working class which was an outcome of the nation’s uncommon economic past. In the 20th century the incorporation of systems of mandatory arbitration, formulated to mediate industrial disputes, strengthened the support for labour unions. In the year 1948, the support for unionism was at its pinnacle. A long process of its fall started as the working cadre constituency that had supplied its social anchor fragmented due to structural transformations in the economy. The collapse of arbitration post-1986 aggravated this declining pattern, as did a rise in unwarranted employment and anti-union tactics of the employers (Docherty, 2010). The present essay reviews the literature on the fall in union density in Australia. Germane studies are critically analysed and compared, and the review brings to light the complexity of the issue, the necessity to avoid simplistic responses, and makes recommendations regarding the areas of study that most likely augment the comprehension of the sharp decline in unionisation.

As per the Australian Bureau of Statistics figures of 2000, the fall in union membership in the nation, despite the attempts made by the Australian Council of Trade Unions to prevent further decline. While it is apparent that there is a reduction in union density, it is critical to evaluate the reasons behind it and what are the unions doing for combating such downward trend. In striving to handle the issue, it is significant to understand the major objectives of the union that draws members and the antecedents of the decline (Abbott, MacKinnon and Fallon, 2016).

Australian unions were set up in the initial half of the 19th, with growth starting in the post gold-rush age. It is from then that the most rapid growth of the period appears to have been in the decade of the 1880s, wherein affluent economic conditions and a constricted labour market were drivers making for the development of unions. The main goal of a union is to enhance the well-being and promote the interests of its members. They were created to offset the higher financial power of the employers (Cooper et al., 2009). It has long been acknowledged that the dominance over the market by the employers could be countered by employees acting jointly and instituting organisations to negotiate on their part. The most crucial function performed by the union was to maximise the salaries and wages of its members.

There are several reasons why employees might join a union. However, three factors are apparent. They are; sense the advantages of unionism surpass the likely costs; displeasure with financial aspects of their job; and an intention to impact those facets of the work environment via union means. Despite the evident benefits of the union, the membership of Australian union has declined. As emphasised by Kaufman, (2008) unionism harvested a core place in the Australian community between 1921 and mid-1950s. Even in the profundity of the Great Depression, the membership never plummeted below 42.5%. Moreover, with the recovery of the economy during World War II, it garnered unprecedented support.

Consequences of Decline in Trade Union Membership and Trade Union Density


Times have significantly changed. Two decades ago 50% of all employees were part of the union. Currently, the rate of unionisation is only 23%. Even the public sector, which was once a mainstay of union power, has witnessed a sharp decline in the density. In the epoch of feminization, computerization and casualization, de-unionization is perhaps the most considerable change to have to strike the labour market over the years. A sign of fall in union strength is the rarity of strikes (Holland et al., 2011). The number of days lost to industrial conflicts is only one-fourth of its level during the early 1980s. To fathom the transition, Bashur and Oc, (2015) posit that it is helpful to discard two common elucidations for union decline briefly. The first is that the density decreased due to the increasing scepticism of workers toward it. In effect, attitude tends to reflect union power. When the membership increased during the 1970s, Australians were more likely to say, pollsters, that they believed unions had extreme strength and less likely to consent that unions had been a great thing for the country. Correspondingly, as they started waning during the 1990s, the portion of individuals who believed that unions carried too much power decreased steadily (Docherty, 2010).

The second argument which is made is that de-unionization was an outcome of the fall in real wages which happened under the Accord. Yet as Leigh, (2011) points out in his study The Decline of an Institution, this statement means that unionisation must have fallen more during the 1980s (when there was a decline in real wage) than the 1990s (when there was a rise in real wages). However, the opposite is true – the most drastic decline in unionisation happened during the 1990s. If not the Accord and attitudes then what led to union density witnessing the downward trend? The fall narrows down to four major factors: changes to the laws regulating unions, higher product market rivalry, growing inequality, and structural changes in the labour market.

The most substantial factor in de-unionization in Australia has been transitions in the legal system regulating the unions.  Hodder and Kretsos (2015) state that between 1990 and 1995, conformist governments in five out of six states brought into effect a legislation intended to prohibit mandatory unionisation, promoting individual bargaining, and introducing changes to non-award coverage easier. Paradoxically, this was similar to the process that took place in the 1920s, when a series of state Labour governments enforced law in favour of wage arbitration and mandatory unionism, resulting in an upsurge in union membership. During the later half of the 1980s, over 50% of the union members needed to be a union member as their employment condition. In the 1990s, not any longer bound to be a member, a huge proportion opted to give up their membership (Leigh, 2011). Expectedly, the unions that bore the biggest brunt were those that were highest dependent on mandatory union laws. The new law was enforced from 1996 when the then government virtually eliminated mandatory unionism and made it challenging for the unions to hire and strike.

The second most significant driver of de-unionization has been increasing competition. Driven by microeconomic reforms, revived Australian Competition and Consumer Commission and tariff cuts, the market for purchasing most goods and services are now considerably more competitive than during the 1970s. When companies have an oligopoly or monopoly situation, it is convenient for them to pay higher salaries to their workers. Prices are greater in non-competitive markets, and in economics’ jargon, this produces “rents”. The employers then share such “rents” with employees (Grenfell, 2017). When monopolies are split, and the marketplaces become competitive, employers have to cut costs. This puts pressure on the companies to follow powerful anti-union strategies to minimise the wage bill.


The third argument for declining union diversity is the increase in earnings inequality. To comprehend how this works, it is crucial to acknowledge that unions not only aim greater wages but also for higher pay compression (Heidecker, 2013). This happens through standardised wage schedules, and claims that ask for an equal increase for every worker. Less pay distribution within an organisation also renders it easy for unions to form, as employees are likely to have mutual cause with those who get similar salaries. Economists have in general focused on the manner in which de-unionization impacts inequality (Bray, Waring and Cooper, 2011). In Australia, Jeff Borland found that 30% of the rise in earnings disparity among permanent males between 1986 and 1994 can be elucidated by falling unionisation. However, the opposite can also be true. If disparity increased (owing to globalisation, technological change, or other factors), unions are likely to find it difficult to create an effective coalition between highly-paid and low-paid employees. The probability of two employees both earning $20 per hour joining the union is higher than if one make $10 and the other $30 (Koukoulas, 2015).

The last factor is structural labour market changes. Throughout the developed economies, unions have an easier time hiring in the public sector, the manufacturing sector, among permanent employees and in big companies. The emergence of the service sector, casualization of the labor force, downscaling of government and the surfacing of SMEs are all transformations that disadvantage unions (Forsyth et al., 2017). To examine the impact of the above-mentioned factors, Peetz, (2012) used a method called “shift-share analysis”, and concluded that they were responsible for nearly 50% of the fall during 1982-92, however, do not elucidate much of the decline since then. As the drop-in unionisation has been quicker in the 1990s as compared to the 1980s, this demotes structural changes to a minor role in describing the overall drop in unionisation in the last 37 years.


Evidence propose that voting by union members is being done with their feet and that other systems are emerging to replace them. The proportion of companies with mutual consultative committees grew two times between 1990 and 1995, and the number of companies with ad-hoc employer-employee committees also increased considerably. Requirements that once only unions could meet are now addressed by new organisations (Davis, 2010).


The macro and microeconomic impacts of the plummeting strength of unions have been debated by policymakers and economists. Nonetheless, the empirical evidence suggests that the effect of the drop on economic aggregates and company performance is not a devastating cause of concern. However, the relationship of falling union strength with increasing earning disparity and the minimising direct communication between employees and employers is potentially more troublesome (Kelty, 2011). For the period of 1995-2010, the coefficient estimate for the alteration in union strength is negative and insignificant statistically, proposing that transitions in union density were no longer connected to redistribution. It is reported by Toscano (2015) that union fall since the 1980s has been accompanied by alterations in the union members’ position in income diffusion. It is speculated that, since the position of an average union member has improved with a decline in density, union members are also no longer very supportive of redistributive policies and wage solidarity. Hence, the disparity issue might stay, but the role played unions is more controversial. Though companies in competitive labour markets might undersupply workers’ voice, but it does not mean that independent unionism is the solution, either from an employee standpoint, or the practicable interest of strengthening productivity. In fact, many researchers have identified that the drop in union voice has been coupled with a substantial growth in non-union voice, such that the total exposure of voice mechanisms has been stable and high (Furze et al., 2011). In short, Australian workers have selected non-union voice over no voice at all. In addition to this evaluating voice regimes, non-union voice overshadows union voice for a series of perceived result indicators – financial performance, productivity, and industrial relations climate – if not turnover. This provides credibility to the concept that management has a motivation of investing in non-union voice, although such positive scene is muddled by comparisons between voice types (Schaper, 2014).  

Conclusion

With the waning of unions, today’s labour markets of Australia are closer to the theoretical models of competitive markets than they were during the 1970s. This is mainly because of a succession of legal changes that have rendered it difficult for unions to organise, but also owing to higher competition in the markets, growing wage disparity and alterations in the composition of the workforce. It is extremely unlikely that any of these alterations will be inversed. More Australians are now employed in sectors that have always had less union strength. Employment in conventionally powerful union sectors like the public sector and the manufacturing sector are being substituted by jobs in service industries and community-based establishments that have low union density. Permanent employees are being substituted by casual and part-time workers, and such types of employment have lower rates of union membership. More of the labor force has become contractors, self-employed or employed in small businesses and do not perceive union membership as important.

References

Abbott, K., MacKinnon, B and Fallon, P. 2016. Understanding employment relations. South Melbourne: Oxford University Press.

Addison, T. J. 2014. The consequences of trade union power erosion. IZA World of Labor.

Bashur, M and Oc, B. 2015.  When voice matters: A multilevel review of the impact of voice in organisations.  Journal of Management, 41(5): 1530-54.

Bray, M., Waring, P. and Cooper, R. 2011. Employment Relations: Theory and Practice. Sydney: McGraw-Hill.

Cooper, R., Ellem, B., Briggs, C., and Broek, D. 2009. Anti-unionism, employer strategy, and the Australian State, 1996–2005. Labor Studies Journal, 34(3): 339–62.

Davis, M. 2010. Unions face fight on a new front. (September 22, Sydney). Accessed March 29, 2017.

Docherty, C. J. 2010. The A to Z of Australia. Rowman & Littlefield.

Forsyth, A., Howe, J., Gahan, P. and Landau, I. 2017. Establishing the Right to Bargain Collectively in Australia and the UK: Are Majority Support Determinations under Australia’s Fair Work Act a More Effective Form of Union Recognition? Industrial Law Journal.

Furze, B., Savy, P., Brym, J. R. and Lie, J. 2011. Sociology in Today’s World. Cengage Learning.

Grenfell, O. 2017. Australian report highlights collapse of union membership. 19 January. World Socialist Website. <https://www.wsws.org/en/articles/2017/01/19/unio-j19.html>. Viewed 29 March 2017.

 Heidecker, P. 2013. Four Reasons For The Decline In Union Membership. 24 April. Clean Link. <https://www.cleanlink.com/cp/article/Four-Reasons-For-The-Decline-In-Union-Membership--15514>. Viewed 29 March 2017.

Hodder, A. and Kretsos, L. 2015. Young Workers and Trade Unions: A Global View. Springer.

Holland, P., Pyman, A., Cooper, B and Teicher, J.  2011.  Employee voice and job satisfaction in Australia:  The centrality of direct voice.  Human Resource Management, 50(1): 95-111.

Kaufman, B. 2008. Paradigms in industrial relations: original, modern and versions in-between.  British Journal of Industrial Relations, 46(2): 314-339.

Kelty, W. 2011. The introduction of enterprise bargaining – a retrospective: Opening address. Enterprise Bargaining in Australia Workshop, Melbourne, Melbourne Law School.

Koukoulas, S. 2015. The decline of union membership. 26 November. The Adelaide Review, <https://adelaidereview.com.au/opinion/business-finance/the-decline-of-union-membership/>. Viewed 29 March 2017.

Leigh, A. 2011. The Decline of an Institution. Australian Financial Review: 21.

Peetz, D. 2012. THE IMPACTS AND NON-IMPACTS ON UNIONS OF ENTERPRISE BARGAINING.  Labor and Industry, 22(3): 237-254.

Schaper, T. M. 2014. A brief history of small business in Australia, 1970-2010. Journal of Entrepreneurship and Public Policy, 3(2): pp.222-236.

Toscano, N. 2015. Trade union membership hits record low. (October 27, Sydney). Accessed March 29, 2017.

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