Exam 5: The Union Perspective

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The institutional economists believed that unions would improve both the efficiency and equity of markets by providing a greater balance of bargaining power between individuals and firms (Kaufman, 2000). This belief was in part a reaction to the unregulated markets of the nineteenth century that led to exploitative wages, excessive workplace injuries and deaths, and the general lack of opportunities for personal growth and development at work.
The macroeconomic purpose of wealth redistribution could be achieved by replacing individual bargaining with collective bargaining through unions. Conditions of unfettered markets that produce such negative outcomes as substandard wages would be replaced with union protection. Thus, the institutionalists envisioned win-win outcomes for employers, workers, and the public at large.
Even more important than enhancing economic outcomes was the institutionalist objective for unions: promoting industrial democracy. Scholars defined industrial democracy in various ways, ranging from simple profit-sharing to government ownership of the means of production. For the institutionalists, there were four key elements of industrial democracy:
1. Employee voice in determining work rules. Representative democracy in industry is representation of organized interests" and "it is the equilibrium of capital and labor-the class partnership of organized capital and organized labor, in the public interest."
2. A written law of workplace rules. Whether carved on stone by an ancient monarch or written in a Magna Carta by a [sic] King John, or embodied in collective agreement between a union and employer, the intent is the same, to subject the ruler to definite laws to which subjects or citizens may hold him when he attempts to exercise arbitrary power.
1. A binding procedure for the enforcement of the written law. Like the Constitution of the United States, the agreement has become a "government of law and not of men." A man is not deprived of his job without "due process of law."
2. A balance of power between management and labour. If one party to the employment relationship has a preponderance of power, it is likely that this power will be used in ways that are both arbitrary and onerous.