Labor Union

Updated on April 10, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Labor Union Definition

Labor Union refers to an association or a group of laborers or employees associated with a particular trade, organization, industry, or company. The prime purpose of forming the international labor union is to put the employee’s demands in front of the management or the government by giving them bargaining power. 

Labor Union

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It acts as a tool to prevent the management from implementing an anti-worker policy. The employees elect their leader, who represents workers’ rights. So, it also bridges the gap between the workers and the management by communicating about policy decisions and objections. Management can only execute worker-related policies after a collective bargaining agreement with the union.

Key Takeaways

  • Labor unions aim to negotiate and bargain the worker’s demands in front of the employer. In case of failure, these unions hold strikes until the employer fulfills their demands. 
  • Labor union types include craft, industrial, general, and federations. Unfortunately, the AFL-CIO and CtW overlook the administration of the trade unions. 
  • The Federal Society of Journeymen Cordwainers was the first labor organization established in the Philippines. Later, the U.S Department of Labor established labor union laws for monitoring them.

Labor Union Explained

Labor unions are voluntary associations that the same trade, firm, company, or industry form to negotiate demands in front of the employer. They aim to solve the queries of the existing workers about working culture and environment and safeguard their working rights. Almost every organization, industry, and profession form its union. Most union members are from the Middle Atlantic, Belgium, Iceland, and other similar countries.

In a trade union, the workers pay union dues to these unions so that they act as attorneys on their behalf. Workers also pay annual contribution charges for elections and social activities and work to strengthen the union. As a result, the workers and the employers develop mutual trust in each other. However, the workers sometimes get triggered by issues like excess working hours, fewer benefits, harmful equipment, etc. As a result, they hesitate to impose their demands and suffer in silence. To fight for their rights, these unions negotiate their demands in front of the company. This negotiation is called “collective bargaining.” 

However, the employer may not comply with the unions’ demands. Therefore, constant bargaining results in labor union strikes in the state. Finally, when the employer agrees, a collective bargain agreement gets signed. This agreement addresses extra labor union wages, sick day leaves, enhanced working conditions, and work-related issues.

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International Labor Unions

They are very popular in the political arena for persuading the importance of their members. Among the major labor union laws, the Labor-Management Reporting and Disclosure Act of 1959 prevails more. It relates to the relationship between the trade union and its members. The Mine Safety and Health Administration (MSHA) overlooks the companies providing unsafe workplaces. However, the National Labor Relations Act (NLRA) dispels freelancers from being a part of these unions. 

The United States, the United Kingdom, and many other countries have given legal status to these unions wherein employers must make a legal collective bargaining agreement. Agreements are often related to the workers’ perks, welfare measures, or working conditions. Various nations govern the unions differently under their laws, rules, and regulations. Hence, the labor laws of different nations give the unions different powers to function. The functions are often related to its members, organization, activities, and society.

In the U.S., three organizations look over the trade unions. It includes the Congress of Industrial Organizations (AFL-CIO), the American Federation of Labor, and the Change to Win Federation (CtW). These organizations help the unions in negotiating and fighting for their rights.


In the past decades, the workers have benefitted through these unions.

Labor unions’ history started in the 18th century during the Industrial Revolution. In 1768, the journeymen tailors protested against the textile mills for wage reduction in New York. Likewise, in 1794, the shoemakers in the Philippines also started trade union strikes. As a result, the shoemakers came together and formed the Federal Society of Journeymen Cordwainers. This organization was the landmark for the start of trade unions in America.

Later in the 19th century, there was a refusal of the black people at work. In 1835, the Black caulkers and other workers held a labor strike at Washington Navy Yard. During this period, there were many trade unions established. One of them is the National Labor Union, created in 1866. Thus, in 1867, the National Labor Union for cigar makers accepted women and blacks.  

However, in the Asian countries, the scenario was running parallel. Many African and Indian laborers formed unions. In 1867, almost 2000 Chinese workers protested against low wages. In 1913, the Department of Labor (currently known as the U.S. Department of Labor) got established. By the late 20th century, almost 21 million workers were members of these trade unions. In 2021, union members reached 14.01 million. However, in 2020, there was a decline of 0.5% in the membership of the trade unions.

Labor Union Types

Different trade unions include craft-based, industrial, general unions, and federations. 

  1. Craft-Based Unions: Daily wage earners of varied professions form this union as it gives them immense bargaining power to safeguard their rights and interests. 
  2. Industrial Unions: Manual labor, semi-skilled, highly-skilled workers from any one industry, for example, electricity or steel industry, form this union. They form it at the industry or regional level.
  3. General-Union: All types of unions, like craft and industrial unions, have one central body. An example includes the national labor union congress. This central union has high power to negotiate for the employees’ rights.
  4. Federation: Many small or localized unions come together to form a federation. It also acts like a political entity with the characteristics of a union. 


Let us look at the examples of the labor union to understand the concept better. 

Example #1

Suppose Alfred & Sons engages in paint production. Almost 400 workers are working in their factory. The company appoints a person as the new divisional head of production. However, due to neglecting behavior, that person ignores the working conditions of the factory. Moreover, the factory provides no safety equipment to the workers. Thus, exposure to chemicals like toluene, n-hexane, methyl alcohol, etc., increases excessively. As a result, the workers suffer from nervous system defects, respiratory diseases, and skin problems. 

The other workers start bargaining with the company regarding the working conditions. But the head ignores their demands. Lastly, workers collected the laborers and formed a trade union. This initiates labor union strikes resulting in a lockdown of the factory. The factory operations stumble. Finally, the company agrees to provide safety equipment to the laborers at work. 

Example #2

In August 2022, workers at Starbucks and Amazon joined trade unions. And the reason behind this is the stagnant wages despite companies making huge profits. These workers compromised with a minimum wage rise, but that did not meet their demands. And this time, the trade unions are in no mood to step back from this opportunity. 

Frequently Asked Questions (FAQs)

1. Which was a major goal of early labor unions?

Before the 18th century, the trade unions aimed at fighting for better wages, proper working conditions, nominal working hours, and similar things. 

2. Are labor unions non-profit?

The majority of trade unions work as non-profit organizations working for the upliftment of the rights of the workers. According to the 501(c)(5) of the Federal law, trade unions are a part of the non-profit as they are not entitled to labor union wages

3. What was the national labor union?

The National Labor union was the first federal organization established in the United States. However, the great depression led to its dissolution in 1973. 

4. Do labor unions pay taxes?

These unions do not pay any taxes to the federal government. However, it is necessary to declare their financial information to the public. Also, they must file an annual or tax return as per the Internal Revenue Service (IRS).

This article is a guide to Labor Union and its definition. Here, we explain its history, types, laws, and examples. You can also go through our recommended articles on corporate finance –

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