"Trade Union Types: Potential Effects on Employers, Workers, and the Economy in China"

Abstract

Do trade unions have a beneficial or detrimental effect on firms? The answer may depend on the type of trade union. Different trade union types pursue different agendas and adopt different methods which impact on the employment terms of workers as well as on the outcomes of employers and the economy. A commonly discussed method of unions is the creation of a labor supply monopoly. This theoretical study proposes trade unions also adopt three other methods—institutionalizing employment rules (including pay and internal labor market rules as well as other HR-related rules), employer hold ups, and controlling access to the occupation. It matches them with three trade union agendas—curbing the labor market competition, maxing out the employer’s bargaining range, and containing the labor supply—yielding four main types of trade unionism. It explores the circumstances under which each type is viable and desirable for different actors. The proposed theory is applied to the current Chinese situation, arguably representing the least restricted form of capitalism. It is outlined how a gradual and partial recentralization of industrial relations to the sector level may address some of the challenges faced by the Chinese industrial economy, including high employee turnover and the transition from low-cost, labor-intensive to high-quality, technologically advanced manufacturing.