Economic Chapter 11: Labour economics 

Labour

• Labour refers to physical   and mental human effort used in the production   process.     Labour   is rewarded by a wage in the factor market.  Labour can be skilled, semi-skilled   or unskilled.
• Labour force.  This   consists    of   economically    active   persons    who   are   either   employed    or unemployed,   aged between     16 – 64 years.  The  labour  force  excludes   groups  such  as  full  time students,  house  wives  and the disabled  who are not involved  in economic   activities.

 

Characteristics (structure) of Uganda’s labour  force

1. It is a rapidly growing labour force. This is due to the high population   growth rate.
2. It is dominated by the young group aged between 15 and 30 years.
3. It is characterized by high levels of unemployment and under employment.
4. It is dominated by unskilled, illiterate and semi-skilled labour.
5. It is dominated by job seekers rather than job creators. This is due to the theoretical nature of the education system.
6. It is characterized by low levels of productivity due to low levels of education and training.
7. It is full of target workers who aim at achieving their objectives in a given time  and leave  the job there  after.
8. It is mainly employed in the agricultural sector.
9. There is high mobility of labour and high rates of brain drain. This is mainly  common  with  the small  fraction  of highly  skilled  labour  that prefers  to look  for greener  pastures  abroad.
10. The labour force is mainly employed in the public sector (government) with very few in the private sector and others are self-employed. The number of people employed   in the private sector is steadily increasing due to privatization   policy of parastatals.
11. There is high rural urban migration of the labour force especially the young group. This leads to massive urban unemployment    due to excessive labour supply in urban areas.
12. There is limited female labour force  as most  of  the  women   work  as  house  wives,   though  the percentage   is increasing  due to increased  number  of females  accessing   higher  education
13. It is characterized by weak trade unions due to poor organization of labour.
14. It is characterized by high rates of absenteeism from work. This is mainly due to poor health conditions

 

Labour supply

Labour supply refers to the number of individuals   who are willing and able to work at the prevailing wage rate in a given time.

Or

Labour supply refers to the number of hours a worker is willing to work at a given wage rate in a given time

Determinants of Labour supply

1. The health conditions of the worker. Good health   conditions    of the worker   increase   labour supply while poor health conditions   reduce labour supply.
2. The level of education and skills. There higher the level of education and the skills    possessed by the workers,  the  higher  the supply  of skilled  labour  but  the lower  the level  of  education   and skills the lower the supply  of skilled  labour.
3. The rate of population growth. The higher the rate at which   the population   grows, the higher the supply of labour and the lower the rate of population   growth, the lower the supply of labour.
4. The level of experience and expertise needed for a particular job. When the job requires   high experience,   for example 20 years, the supply of labour for that job reduces.  But when the level of experience required is low, then labour supply increases.
5. The nature of the job. The higher the risk on the job, the lower the labour supply and the lower the risk of the job, the higher the labour  supply.
6. Level of motivation at work. High   motivation    in  form   of  attractive   wages,   better   working conditions   etc. increase  labour  supply  but poor  motivation   of workers  in form  of low  payments and poor working   conditions  reduce  labour  supply.
7. The rate of investment in the economy. The higher the investment   rate, the higher   the labour supply.   This   is because   an increase    in investments    increases   the work   activities    hence   an increase in labour supply.  But the lower the investment   rate, the lower the supply   of labour.
8. Degree of mobility of labour. The higher   the degree   of labour mobility   geographically     an occupationally,    the  higher  the  labour   supply  and  the  lower  the  degree  of  labour  mobility,    the lower  the labour  supply.
9. The government policy. Government    policies   in form   of early retirement    age of workers, restrictions   on child labour etc. reduce labour supply.  But  if the government   policy  is in support of  labour  supply  for  example   recruitment   of workers   in civil  service,  high  retirement    age  etc. increases  labour  supply
10. The degree of political stability. The higher the degree of political  stability in the country,   the higher   the  labour  supply   and  the  lower  the  degree  of  political   stability,   the  lower   the  labour supply.

 

Demand for labour

This refers to the quantity of labour desired by an employer at a given wage rate in a given time.  OR. It refers to the number of people employers   are willing to offer jobs at a given wage rate in a given time.

 

Determinants of demand for labour

1. Derived demand for labour. The  higher  the  derived  demand   for  labour,  the higher   demand   for labour  and the lower  the derived  demand  for labour,  the lower  the demand  for labour.
2. The degree of substitutability of labour. The higher the degree of substitutability    of labour by other   factors   of production,    the   lower   the   demand   for labour   but   the lower   the   degree   of substitutability   of labour, the higher the demand for labour.
3. The nature of technology used. Use of capital intensive production  techniques   (where more units of capital  are used  as compared   labour)  reduces  the  demand   for labour  while  the  use  of  labour intensive   production   techniques   (where   more  units  of  labour   are  used  as  compared   to  capital) increase  the demand  for labour.
4. The price of labour (Wage rate). The higher  the wage  rate,  the lower  the demand  for labour  and the lower  the wage  rate,  the higher  the demand  for labour.
5. The marginal productivity of labour.  Marginal   productivity    of labour   refers   to the additional output resulting   from employing   an extra unit of labour.  The  higher  the marginal  productivity    of labour,  the higher  the  demand   for labour  and  the  lower  the  marginal   productivity   of labour,   the lower  the demand  for labour.
6. The price of substitutes for labour. The higher the price of substitutes,  the higher the demand   for labour and the lower the price of substitutes,   the lower the demand for labour.
7. The degree of competition for labour among firms. The higher the degree of competition    for labour  by  firms,  the  higher  the  demand   for  labour  and  the  lower  the  degree  of competition    for labour,  the lower the demand  for labour.
8. The government policy. The   government    policy   of  minimum    wage   legislation    for  workers reduces   the  demand   for  labour   while   the  government    policy   of  maximum    wage   legislation increase  the demand  for labour by the firms.
9. The size of the production unit (firm). The bigger the  size of the firm,  the higher  the  demand   for labour  and the smaller  the size, the lower  the demand  for labour  keeping  other  factors  constant.
10. The proportion of cost of labour to the total cost of production. The smaller the cost, the higher the demand for labour and the higher the cost, the lower the demand for labour.

 

Productivity and efficiency of labour

• Productivity of labour. It refers to output produced per unit of labour employed in a given time.
• Efficiency of labour. It refers to the measure   of  quality  and  quantity  of output  a unit  of  labour can produce  in a given  time.

 

Determinants   of efficiency and productivity   of labour

1. The quality of education and training. The higher the level  and quality  of education   and  training, the higher  the  efficiency   of labour  and   the lower  the  level  and  quality  of education   and  training, the lower  the efficiency  of labour.
2. The level of technology used. Use of modem  production    techniques   increases   labour   efficiency but in case of poor production   techniques, efficiency of labour decreases.
3. The nature of the working conditions. Good working   conditions   and motivation   of workers   in form   of higher   wages,   provision   of lunch   etc.  increases   the efficiency   of labour   while   poor working conditions reduce the efficiency of labour.
4. Availability and quality of the co-operant factors of production. Labour   combines   with other factors   of production    to make the production   process   complete.   Presence   of such   factors   like capital increases   the efficiency   of labour while absence   of such factors reduces the efficiency   of labour.
5. The degree of specialization and division of labour. The higher the degree of specialization, the higher the efficiency of labour. This is because with division of labour, a right person   is put in a right position.  But the lower the level of specialization,   the lower the efficiency of labour.
6. The level of experience and seniority of the worker. Experienced  workers are more efficient   than workers  who have  less experience.
7. The health and physical conditions of the worker. A worker who is healthy and in good physical conditions  is more efficient than one who is sickly and physically   handicapped.
8. Prospects of promotion at the place of work. Workers  with high hopes of being promoted   at the place  work  are more  efficient  than those with less prospects   of being promoted.
9. Personal qualities (abilities) of the worker. Workers  who are more innovative   and hardworking at the place of work are more efficient than those who are lazy and less innovative.
10. The strength and nature of the supervisory staff. In organizations  where   there   is efficient supervision   by the administration,   the efficiency of workers is higher than in organizations    where there is no serious supervision.

 

Wages

A wage is a monetary reward to labour for the services it renders in the production   process in a given time.

• Nominal (Money) Wage. This refers to the wage paid to the worker in monetary  terms in a given time for example 50000/= paid to the worker per week.
• Real Wage. This refers to the basket of goods and services  that a nominal wage can purchase   in a given time.

• Reserve wage.  This  refers  to  the  minimum   wage  below  which  the  individual   cannot   accept  a given job  offer.

Factors affecting reserve wages

• Changes in the individual’s overall wealth. Rich employee cannot not accept low wage
• Length of unemployment. A person who has be on lengthy unemployment accepts low minimum wage
• Marital status. When a spouse has a higher wage, reserve wage increases
• Health and disability issues. Disabled people are willing to accept low reserve wages
• The higher the education the higher the reserve wage
• Experience and skill. The higher the experience the higher the reserve wage
• Job tasks. The higher the risk of the job the higher the reserve wage
• Cost of living. The higher the cost of living, the higher the reserve wage
• Labour mobility. The higher the labour mobility the higher the reserve wage
• Success and performance.

Methods of wage determination in Uganda

1. Collective bargaining. This  refers  to round  table  negotiations   between  the  representatives    of the trade  union  and  the  employer   aimed  at  improving   wages  and  other  working   conditions    of  the workers.   The  stronger  the  trade  union,  the higher  the wage  and  the weaker   the  trade  union,  the lower  the wage
2. Government wage determination. This is where the government   sets the wage which   is to be paid to the employees by the employers.    This can either be a minimum wage or maximum   wage.

(a) Minimum   wage legislation (wage floor).This   is where the government   sets a wage above  the equilibrium   wage  below  which  the  employer  is not  allowed  to pay  the workers.   This is done to protect the workers from being exploited by the employers.

(b) Maximum wage legislation (Wage ceiling).This is where the government   sets a wage below the equilibrium   wage  above  which  the  employer  is not  allowed  to pay  the  workers.   This  is done  to protect  the employers  from  being  exploited  by the workers,  especially  through  their  trade  unions.

Note.   For the implications   of fixing maximum   and minimum   wages, relate to the effects of fixing maximum   and minimum prices.

 

3. Piece rate. This  is where  wages  are paid  according  to the amount  of work  done  by the  employee for example  10,000/=  for 2000 bricks  made.   This is common with unskilled   labour.
4. Time rate. This is where wages are paid to employees  according   to the number   of hours worked for example 1000/= per hour, 1O, 000/= per day or 500,000/- per month.   This is common with skilled labour.
5. Signing contracts between   employers   and employees.    In this case, contracts   are signed which specify the wage to be paid to the employee for a given time.
6. Wage leadership. This  is where  small  firms  set their  wages  following   the  wages  paid  by  large firms  to  their  workers.     Therefore   large  firms  determine   the  wage  which   is  to  be  paid  to  the workers  by small  firms.
7. Market forces of demand and supply of labour. This is where the wage paid to the employees   is determined by the market forces of demand and supply in the labour market.
8. Individual bargaining.  This  is where  individual   workers  bargain  with  employers   the  wage  they are supposed  to be given  in a given  time.

Note

(a)  Wage freeze.  This  is where  the  government   directly  and deliberately   keeps  down  the wages  paid to  the  workers   for  some  time  to  check  on  the  aggregate   demand   and  control   inflation   in  the economy.

(b)  Wage restraint. This is where the government   indirectly   influences   private   employers   and trade unions  to keep  down  the  wages  paid  to the workers  to check  on aggregate   demand   and  control inflation  in the economy.

Methods of wage payment

(a)  Sliding scale method (Wage index system).  This is where wage payment is related to the cost of living.   Workers are paid more if the cost of living is high and are paid less if it is low.

(b) Bonus system (Wage drift).   This  is  where  workers   are  paid  extra  pay  for  the  work  done  in addition  to their normal  pay rate  for the minimum  work  they are supposed  to do.

(c) Payment in kind.    This  is  where   a worker   is  paid  in terms  of  goods   for  the  work   done   for example  giving bunches  of bananas  to those working  in a banana  plantation.

(d) Time rate system.  This is where a fixed wage is paid to a worker after working for a given time for example a month, a week etc. OR .This is where a worker is paid a fixed wage according to the number of hours the worker allocates to the job.

Advantages of time rate system

1. It is easy to understand and calculate by both parties that is the employer and the employees for example 200,000/= per month.
2. It can be applied where  output  cannot  be  easily  measured  quantitatively   for  example  the services of a doctor,  teacher
3. A worker is assured of a regular and defined payment even in case of absence from duty. This enables the worker to plan effectively.
4. It leads to high quality work. This is because employees are motivated by the regular payment.
5. It reduces income inequalities among workers in the same firm. This is because all the workers are paid a uniform wage basing on the number of hours worked not the amount of work done.
6. It is suitable for organizations where team work is emphasized as opposed to individual effort.

 

Disadvantages of time Rate System

1. It  requires  a lot  of  supervision  to  see how  the  work  is being  done.  This is costly to the management.
2. It promotes   work inefficiency   among   the hardworking   employees   especially when they discover that they are earning the same or less wage as compared to the lazy ones.
3. It leads to low output.  There is a tendency of workers to dodge or do little work since they are assured of their wages at the end of the period.
4. It leads production of low quality products.  This is because it does not consider how work is done but rather the period worked.
5. It  is not suitable  to use in  a situation  where  there  is need  to increase  output  very fast   for example when a firm  is supplying a certain product  to a given company  and there is a sharp increase in demand.
6. 6. It is difficult to identify the hard working employees when using the time rate mode of payment.

 

(e) Piece rate system. This is where the worker is paid according to the amount of work done in a given time. For example sales persons are often paid a commission basing on the volume of their sales, cotton harvesters are paid according to the number of baskets harvested.   The more the effort and output, the more the wage paid to the worker.

Advantages of piece rate system

1. Output of the firm can easily be increased. This is because workers aim at maximizing their income and therefore they devote much of their time working hence increase in output.
2. It minimizes the cost of supervision as compared to the time rate mode of payment. This is because it ties payment directly to performance.
3. There is less time wastage as workers use most of their time working to earn more. This helps to obtain high levels of effort from the workers which increase their productivity  .
4. It is suitable where the quantity of work can easily be estimated (measured).  For example in cotton harvesting where the number of baskets harvested is considered.
5. It helps to identify the most able workers. The employer can easily identify the abilities  of different workers by considering the quantity of work done.
6. It increases the innovativeness and creativity workers. This increases their productivity in the production process.
7. It helps to minimize discrimination and nepotism involved during payment. This is because workers are paid according to their abilities.

Disadvantages of Piece Rate System

1. It worsens the health conditions of workers .Workers tend to overwork  themselves   in order to earn more.  This also lowers their standards of living due to leisure foregone.
2. Fluctuations in the workers’ earnings overtime. The workers  are not assured of a regular and defined income and therefore they cannot plan effectively   that is, in the case the worker is absent from duty.
3. It is not appropriate to some occupations which involve the provision of services for example doctors, teachers etc.
4. There is a possibility of trading off quality for quantity. Quality of output declines   as workers are more interested in quantity other than quality.
5. It leads to over production which results into excess supply in the market. These forces the prices and profits to reduce and eventually a reduction in the wage.
6. It increases income inequalities among workers of the same firm.  This is because   those with more ability to work earn more than those with less ability.

Theories of wage determination

(a)   Subsistence theory of wages (Iron law of wages). According  to this  theory,  workers  are given  a wage   which   is just   enough   to  enable   them  acquire   the  basic   needs/necessities  for  example housing,  clothes  and food.

Application of the iron law of wages in Uganda

• Casual worker/unskilled labour are applied basing on the level of their subsistence needs.
• in the subsistence sectors of Uganda, reward to workers is based on basic needs
• entrepreneurs due to profit maximization goal pay workers’ wages just enough to meet their basic needs

Limitations of the iron law of wages in Uganda

• the law/theory approaches the problem of wage determination entirely from supply side; it ignores the demand for labour entirely thus difficult to apply
• the theory relates wage rates to birth rates/population growth rate which is not the case in Uganda
• According to the theory all workers should be receive the same wage which is not the case in Uganda
• the theory does not  consider the fact that the bare minimum need(s) varies from time to time depending on the price levels, economic conditions, etc.
• the theory is only applicable to the subsistence sector/subsistence level of living but not commercial sector.
• Trade Unions interference in wage determination is not taken into consideration
• contrary to the law, employees worker harder when paid higher wages than when paid low wages

(b)    Wage fund theory. According   to this theory, a wage fund is created out of which the wages are paid.   This wage fund is accumulated   from profits realized from production.

(c)   Residual theory of wages. According   to this theory,   the wages   are the residues   (left overs)   after other factors of production   have been rewarded.    The more the left overs, the higher the wage.

(d)   Bargaining theory of wages.   This theory   states that wages   are determined    by the relative strength   of the trade union and the concerned   employer.   To arrive at a given wage   involves negotiations   between the employer and the trade union representatives.

(e)   Market theory (Modern theory) of wages. According   to this theory, wages are determined   by the market   forces   of demand   and supply   for labour   in the labour   market.     If there   exists excessive supply of labour in the market, wages fall and if there is excessive   demand for labour, wages increase.

(f)   Marginal productivity  theory of wages (labour).This  states  that  labour  should  be paid  a wage which  is equal  to the value  of its marginal  product,  that  is, the value  of additional   unit  of output produced  by extra unit  of labour  employed.

Value of marginal product of labour = Marginal product of labour x price of output (MPL  X P)

Wage   = Value of marginal product of labour (V.M.P_L)

= marginal revenue product  of labour (MRP_L)

 

Assumptions   of the Marginal productivity    theory of wages (labour)

1. Perfect competition   in the labour market.
2. Homogenous   units of labour employed.
3. There is no government intervention   in the labour market.
4. Employers know the marginal product of their workers
5. Labour can measure its marginal product.
6. Labour is perfectly mobile
7. There is equal bargaining power between the employer and the employees.
8. It assumes the law of diminishing   returns in the production   process.
9. It assumes existence of excess capacity in the production process.

 

Criticisms (Limitations)   of the marginal productivity   theory of wages (Labour)

1. It  assumes  no government  intervention  yet  governments   especially   in  developing    countries, being   the  major   employers   interfere   in  the  labour  markets   by  fixing   the  wages   paid   to  the workers.
2. It   assumes perfect   mobility of labour yet there exists   high   levels   of   geographical and occupational   immobility which exists in the labour markets.
3. Most employers do not have enough information to assess the marginal productivity   of their workers.
4. It is not easy for workers to determine their marginal productivity as the theory assumes.
5. The theory assumes conditions of perfect competition which does not exist in the real world.
6. Units of labour are not homogenous as the theory assumes. This is because of the differences  in educational   levels, abilities and skills.
7. It is very difficult to measure the marginal productivity of labour as an individual factor.  This is because marginal product is as a result of all factors of production.
8. The  theory fails  to put  into account  the exploitative habits of employers which  makes   them  to under  pay their  workers  below  the value  of their marginal  product.
9. The bargaining power varies between employers and employees due to differences  in bargaining skills and qualities.
10. It does not consider the high  levels of unemployment  and  underemployment   which   tend  to force the workers  to accept  wages  even below  their marginal  product.
11. The theory assumes free and fair competition among the workers for jobs yet there is a lot of discrimination in the labour market based on sex, religion, tribe, political differences   etc.
12. The theory is irrelevant under  conditions  of full  employment  where  there  is no  room  for  the extra  worker to  add on to the total output.
13. Marginal productivity change over time due to economies and diseconomies of scale. Therefore it can lead to instabilities in wages if it is used as a basis of wage  determination.
14. At times wages are greater than the marginal productivity due to pressure  from   the trade unions.

 

Wage differentials

This  is  where   different   workers   earn  different   wages  in  the  labour   market   that  is,  where   some workers  earn more  wages  than others.

Causes of wage differences among workers

1. Differences in the levels of education.  The  higher  the  level  of  education,   the  higher   the  wage paid   to  the  worker   and  the  lower   the  level   of  education,    the  lower   the  wage.   This   is true especially   in public service where workers are paid basing on the salary scale.
2. Differences in skills and experience.  Highly   skilled  and  experienced   workers   receive   higher wages  than  their  counterparts   doing  the  same job  for example  a senior  teacher  or  engineer   earns more  than a newly  qualified  teacher  or engineer.
3. Differences in the bargaining power   between employers and employee’s (Trade unions) trade unions.  Workers in trade unions with strong bargaining power are paid more than those in trade unions with weak bargaining power.
4. Differences in the cost of living. In areas where  the cost of living  is high,  the workers   are likely to be paid  higher  wages  than  where  the  cost  of  living  is  low. For example   urban   versus   rural areas.
5. Differences in the nature of the job (that is temporary or permanent). Workers  employed   in temporary jobs  (contracts)   are paid higher  wages  than those  employed  in permanent  jobs .
6. Differences in working conditions. Worker in risky jobs such as mining are paid higher wages as compared to those employed safe jobs.
7. Differences in job   status   and   responsibilities.   Workers    in  high    positions     with    more responsibilities are  paid  higher  wages  than  those  in lower  positions   with  fewer  responsibilities e.g. a manager  is paid more  than the cleaner  working  in the same organization.
8. Differences in elasticity of supply of labour. Labour that has inelastic   supply is paid a higher wage as compared   to labour with elastic   supply.   For example   skilled   labour   versus   unskilled labour.
9. Differences in demand for products. Labour involved in the production  of the product with high demand is paid a higher wage as compared   to labour involved in the production   the product with low demand.
10. Differences in the health conditions. A worker who is strong  and  healthy  has  the  ability  to do more  work  hence  earning  more money  than  a weak  and sickly  worker  especially   under  piece  rate system.
11. Government policy. The government can deliberately   fix higher wages for employees   in certain sectors   and low wages   for employees   in other   sectors.   This creates   wage   differences    among workers.
12. Differences in mobility of labour. Labour which is highly mobile  is likely to earn more than labour which  is immobile.
13. 13. Differences in sex .Generally, male workers earn more wages than their female counterparts.
14. Differences in talents. Workers with special talents earn more wages than workers who are not talented.  For example musicians,  footballers   etc.
15. Nepotism. Some workers are favored with higher wages compared to their counterparts

 

Trade unions

Trade unions are labour   organizations    formed   to maximize   the well-being    of their members   by negotiating   for  better  wages   and  improved   working   conditions   through   collective   bargaining    with employers.

Examples of Trade unions in Uganda

• Uganda Medical Workers’   Association
• Uganda National Teachers’   Union.
• Uganda Law Society     etc.

Objectives  of Trade  Unions

1. To bargain for better wages for their members.
2. To demand for improved working conditions for their members.
3. To organize workshops, seminars and refreshers courses for their members.
4. To protect workers from unfair dismissal from the jobs.  (Job security).
5. To advise the government on policies concerning manpower planning,   employment    policies and wage determination.                                             . .
6. To create friendly social relations between employers and employees.
7. To provide  an  effective  means  of  expression for  the  workers  on problems   of  society   and politics.
8. To help and look for employment   opportunities   for their members   when they are laid off from other firms.

Types of Trade unions

1. Closed shop Trade Unions (Monopoly unions). These  are  trade  unions  which  require   employers to  employ   only  the  workers   who  are  members   of  the  trade  union   for  example   Uganda   Law Society.
2. Open shop Trade Unions. These are trade unions   where workers   are free to get employment irrespective of whether they are members of the trade union or not.
3. Craft unions. These are trade unions  formed  to organize  the workers  according   to their  particular skills  for example  doctors,  lawyers,  teachers  etc.                                                       .
4. Industrial unions. These   are trade unions   which   attempt   to organize   workers   in a  particular industry  regardless   of  the  type  of job  done  by  the  workers.   Members   are accepted   regardless   of their place of work, nature of work and qualifications   etc.  for example  Uganda  National   Teachers’ Union  etc.

Determinants of the membership and strength of Trade Unions

1. The nature of leadership skills, organization and management. If the  trade  union  has  leaders who   have   the  necessary   training   and  skills   to  manage   the   union   and  present   the   workers’ aspirations,   the  union  becomes   stronger   as  compared   to  one  with  leaders   poor   or  inadequate leadership  skills.
2. Amount of funds and financial strength of the union.  The stronger   the financial   state of the union, the stronger the union and the weaker the financial state, the weaker the union.
3. Level of unemployment in the country. The higher the level of unemployment  in the country, the weaker the trade union and the lower the level of unemployment,    the stronger the union.
4. The cost of joining the union. The higher  the  cost  of joining   the union  in  form  of membership and  subscription   fees,  the  smaller  the  size  of  the  union  and  the  lower  the  costs,  the  bigger  the size.
5. The cost of organizing the work force to join the union. In situations where it is difficult   to organize   members    for   example   in the   agricultural    sector,   it becomes    hard   to unionize    as compared to other sectors like industry.
6. Legal environment regulating employer-union relationships.  For example,   clear labour   laws, right-to work laws, etc. If the legal environment   promotes the activities   of unions in the country, they become   stronger,   unlike   in situations   where   the legal environment    does not favour   trade unions.
7. Nature of employment (that is either full time or part time employment).   Full-time   employment encourages the workers to join the union unlike part time employment.
8. The prevailing economic situation in the country.  High   levels  of  inflation in  the  country increases  the chances  of members  to join  trade  unions  due to a decline  in real wages  as compared to a situation  where  there  are low levels  of inflation  in the country.
9. Nature of the political climate in the country.  Political   stability   motivates    workers   to form unions due to relative peace, unlike in situations   when the country is politically   unstable.
10. Elasticity of demand for labour. Labour  with inelastic   demand   for example   skilled   labour   is likely to form a stronger trade union than labour with elastic demand (unskilled   labour).
11. Level of productivity of workers. The higher the  productivity    of workers   the  stronger   the  trade union,  and the lower  the productivity   of workers,  the weaker  the trade  union.
12. Elasticity of labour supply. Labour  with elastic   supply   is likely   to form   a weaker   union   as compared to labour with inelastic supply.
13. The size of membership. The bigger the number   of workers   in the  trade  union,  the  stronger   the union  and the smaller  the number,  the weaker  the union.

Tools (Methods) used by Trade Unions to achieve their objectives

There  are mainly  two ways  through  which  trade  unions  can use to achieve  their  objectives.

(a) Peaceful settlement

(b) Use of Force (strikes)

(a)Peaceful settlement includes the following;

1. Collective bargaining. This  refers  to  the  round   table  negotiations    between   employers    and  the members   of the  trade  union  through  their  representatives    concerning   the  conditions   of work  and wage  rates paid  to the workers.
2. Mediation. This is an intervention   in an industrial   dispute  by  an independent   and  impartial   third party who  examines   the  arguments   of both  sides  and makes  a recommendation     for resolving   the dispute.
3. Arbitration. This is where both parties present their offers to an objective  and impartial   third party (arbitrator),    who   is effectively   the  judge.   In this case he/she   compares    the two   offers.   After studying  the both  sides,  he comes  up with  a recommendation    for resolving   the dispute  which  then binds  both  parties.

(b) Settlement by force

If the union  fails  to come  to an agreement   with  the employer  through  peaceful   settlement,   it may resort  to use of force  in the following  ways;

1. Violence (Sabotage). This involves putting down tools, destruction  of buildings,   machines   etc. so as to compel employers   to accept the demands of the workers.
2. Slow down strike. In this case, workers   report   for work but work at a slow pace.  They may decide to work either for less hours or do less amount of work.
3. Sit down strike. Here, workers report to their places of work to do nothing.    They may also refuse to leave the place where they are employed.
4. Boycotting the product of that industry.  The union members   may boycott   the consumption    of the  products   of the  industry   (primary boycott) or they  may  decide  to convince   the public  not  to buy the products  of the industry(Secondary boycott)
5. Picketing.  This  is  where   those  who  want  to  work  are  prevented   from  doing  so.  It is done by deploying members   of the union to punish those who want to work (strike police)

Conditions (Circumstances)   that force workers to demand for higher wages

1. When there is a rise in the cost of living. This is because  a rise  in the  cost  of living  reduces  the real wage  of the workers  which  forces  them to demand  for wage  increases.
2. When workers compare their wages with workers in another sector or industry. Trade  unions may  want  their  members   to get high  wages  as  their  counterparts    doing  similar  jobs   in  another industry.   This  is  based   on  the  conviction   that  it  is  fair  for  workers   doing   similar  jobs   to  get similar  rewards.  For example workers in rural and urban areas working in the same industry.
3. When there is an increase in the profitability the industry.   An  increase   in the  profits  made  by the industry  may  force  the union  members  to demand  for higher  wages.
4. When there increase in productivity of the workers. The increase in the productivity  of workers in form of additional   training and other qualifications   may force the union to demand   for higher wages
5. When the government sets a high minimum wage. Trade unions may demand for higher wages when  the private  employer  is paying  a wage  which  is below  the one set by the government.
6. When there is increased job risk. Workers  can be forced  to demand   for higher  wages  when  the risk on the job  increases  for example  digging  a pit latrine,  mining,  constructing   a stored  building etc.
7. When the employer fails to pay the wage agreed upon in the contract. This   can force   the workers to demand for higher wages.
8. When there is increased workload or number of hours of worked. This can also force workers to demand for higher wages.

Problems facing Trade unions in Developing   countries

1. Poor leadership.  There  is  lack  of  well  qualified   and  experienced    leaders   to  put  forward   the workers   problems   and  aspirations.     Such leaders   fail to present   their problems   properly   to the management.
2. Limited capital and other financial resources. This is as a result of high levels of poverty among the workers   due to little payment.    Therefore   such members   cannot sustain the activities   of the trade unions.
3. High levels of unemployment.  There are high levels of unemployment    in developing   countries which make trade unions weak.  Workers fear to go on strike for fear of losing their jobs
4. Lack of interest by the workers. Many workers   lack interest   in the activities    of trade unions. This makes trade unions to be in a weak bargaining position.
5. Government interference in the activities of trade unions. Strikes are made illegal, government workers lose their jobs or are put in prison once they stage strikes.     .
6. High levels of corruption and embezzlement of union funds by the leaders. This discourages the members hence weakening the unions.
7. Poor communication network inform   of inaccessible roads. This makes it hard for the workers to be properly   coordinated   and organized   in fulfilling   the activities   and objectives   of the trade unions.
8. Over ambitious plans.  Trade unions   in developing   countries   are over ambitious    and therefore their demands cannot easily be achieved and met by the employers.
9. Dominance   of Agricultural   sector in economies   of developing   countries.   Most   workers especially in rural area mind less about the little salaries because they supplement them with agricultural incomes
10. Tribal, political, religious and   regional   differences   among   workers.   This    makes    the organization and leadership    of trade   unions   very  difficult.      This also   weakens   the unity   of members and their bargaining power.
11. Temporary nature of employment. Most of the workers are employed  on probation or  contract   and therefore their conditions   are fixed and cannot form trade unions.
12. Interfering the activities of trade unions with politics. Trade union leaders  tend  to use  them  to achieve  big  posts  in the  government.   This makes trade unions political   groups and render them inactive.
13. High levels of illiteracy among members. Most members are illiterate and ignorant of the benefits of trade unions
14. In most developing countries, the government is the biggest employer. Governments  always refuse   to increase   wages   as an  anti-inflationary    measure.   This weakens   the activities   of trade unions.
15. Small membership. Membership may too small to be significant.

16   Weak industrial sector. Most people are employed in agricultural sector where workers are scared and cannot easily be organized into Trade Unions

 

Revision questions

Section A questions

1. (a) Define the term labour  force.

(b) Outline three characteristics of Uganda labour force.

2. (a) Distinguish  between  labour  productivity   and labour efficiency

(b)  Suggest any two ways increasing   labour productivity   and labour efficiency in your country

3. (a) What is   meant  by demand  for labour’?

(b) State any three determinants   of labour   demand in the economy

4. (a) State the marginal productivity    theory  of distribution.

(b) Outline three assumptions   underlying   the marginal productivity   theory of distribution.

 

5. (a) Differentiate between labour freeze and labour constraint.

(b)  Give any two causes of wage differentials   in your country

6    (a)  what  is meant  by minimum  wage  legislation?

(b)  State any two reasons for minimum   wage legislation in your country

7    (a)  Distinguish   between  Money  wage  and Real wage

(b)  Give two determinants   of real wage in an economy.

8    Mention   four circumstances   under which      time rate is preferred   to piece rate system   of wage payment

9   (a) What is meant by a reserve wage

(b) Mention three determinants   of reserve wage in your country

10 (a) Distinguish   between “time rate” and ‘piece rate” methods of wage payment

(b) Mention two merits and two demerits of time rate method of wage payment.

11  (a) Differentiate   between a closed shop and open shop trade unions

(a) Give any two settlements by force tools used by trade unions to achieve their objectives.

12 Mention four objectives of trade unions.

13 (a) State the “iron law of wages”

(b) Give three peaceful tools used by trade unions to achieve their objectives

14 (a) What are Trade  Unions?

(b)  Distinguish   between closed  shop  and open  shop trade unions.

Section B questions

1   (a) Explain  the Marginal  Productivity   theory  of labour

(b) What  are the limitations  of the Marginal  Productivity   theory  of labour  in the determination    of wages?

2   (a) How  are wages  determined  in your  country

(b) Account  for wages  differences   in your country

3   (a) Under  what  circumstances   may  trade  Unions  demand  for higher  wages.

(b) What  are the problems  facing  trade Unions   in your country

4   (a) What  role do trade unions  play  in the development   of an economy

(b) Explain  the factors  that determine  the strength  and success  of trade unions  in an economy

(c) What  is the basis  for higher  wage  claims  by trade unions  in your country?

5   (a) What  is meant  by collective  bargaining?

(c) Explain  why trade unions  are increasingly   becoming  un popular  in your country.

6   (a) Describe  the features  of your country’s   labour  force

(b)  Explain  the determinants   of labour  supply  in an economy

 

Dr. Bbosa Science            +256 778 633682