Putting NTUC into context

Eugene Mark

There are two types of trade unions – micro-focused unions and macro-focused unions. Micro-focused unions would want to ask for higher wages for their union members.

According to Figure 1, if the firms give in, the wage rate would be raised from W to WT and the equilibrium point would move from E to ET. There is a likely possibility that the number of workers employed would also move from L to LT. Therefore, the number of workers who will lose their jobs is represented by LTL.

If the firm refuses to give in, these unions may organize a strike which will hurt both parties and the economy. When unions negotiate for higher wages, they do not think about economics, which could be explained by the Hicks Paradox. YX line represents the market constraint facing the firm and the union. For example, the total profit is $100 and the win-win outcome should be $50 each for both the union’s rent and the firm’s rent.

However, in this case, the union and the firm each insist for $75, which are represented by points A and B on the YX line. If strikes do occur and they are costly to both parties, S may ultimately be the point where settlement is reached, with each of them getting 40, lesser than the win-win outcome.

Conversely, macro-focused unions aim to maximize total employment. Using Hick’s framework, macro-focused unions can shift the YX line upwards and establish a win-win outcome.

Assuming that both the union and the firm agree to a settlement at point E, both of them work towards shifting the YX line upwards to allow bargaining for bonus. Now, both sides will bargain between J and K. It is a healthy zero-sum game.

However, if the union and the firm each have a starting position on points A and B, a typical macro-focused union would not want to go on strike. They will work together towards reaching E. The National Trades Union Congress (NTUC) is one such example.

The NTUC

Essentially, the NTUC is the national body of all trade unions in Singapore. The 21-member Central Committee sits on top. It has 61 affiliated unions, and 12 social enterprises. Workers join these affiliated unions at the branch level. Branch leaders are elected by union members of each branch, while affiliated union leaders are elected by each of these branch leaders. Finally, 21 members of the Central Committee are elected by affiliated union leaders.

The organisation structure of the NTUC is rather unique. The Central Committee of the NTUC comprises of members who are macro-focused. On the contrary, the affiliated union leaders and the branch leaders are micro-focused. In other words, members of the Central Committee would work towards achieving macroeconomic indicators such as full employment, while the affiliated union leaders and the branch leaders would fight to improve workers’ wages. Then, the question to be asked is how to ensure that micro-focused strategies are not over-riding macro-focused ones.

Now, the National Wages Council (NWC) and the Industrial Arbitration Court (IAC) come into the picture. The NWC wage guidelines are to serve the objective of maximizing employment, which act in part to discourage micro-focused behaviour. Wages could be increased, but not at the expense of full employment of the society. The wage guidelines are not compulsory and binding, but are generally accepted by wide circles in Singapore.

First, the public sector would implement these guidelines. Second, any wage disputes between the union and the firm would be settled at the IAC, who refers to the NWC wage guidelines, before reaching a decision. Thus, it could be construed that the unionized sector would administer these guidelines as well. Third, large corporate firms in the private sector would also abide by these guidelines, if their CEOs are committee members of the NWC. In essence, the wide acceptance of the NWC wage guidelines controls micro-focused strategies by the affiliated union leaders and the branch leaders.

The problem of free-ridership

It is now clear that macro-focused unions serve the overall interest of the country. In spite of this, the NTUC has a problem of convincing workers to join. Ultimately, if the goal is to satisfy macroeconomic objectives that could benefit everyone, why do I have to join and pay my union dues? There exists a problem of free-ridership by other non-unionized members. Therefore, the NTUC has now adopted non-collective bargaining benefits or “country-club” benefits to lure workers.

Members could now enjoy recreational options, in affordable resorts and theme parks. Those workers who join for the country-club benefits could be termed as social members. We should be mindful that although union memberships are increasing, some of them could be social members amongst union ones. Because the capacity of the unions to provide such benefits is limited, the Singapore government helps to raise funds for them, thereby explaining a part of the “symbiotic relationship” they allegedly have.

The controversy over the role of the NTUC

According to the opposition, trade unions should be free from “political interference or obligations”. Taking that point a step further, the affiliation of any unions to a political party is not necessarily good for the well-being of macro-focused unions. Within the NTUC, it could be posited that top graduates on government scholarships are nominated to stand for election at the affiliated union level. Some of them are elected as affiliated union leaders and another few would become members of the Central Committee.

Although the initial motives for ensuring the continuity of a macro-focused union were legitimate, there could be a problem if the political leadership change hands. If that day comes, no union leader would be pursuing macro-focused objectives as they are unpopular. Ideally, macro-focused unions should strive towards related objectives, without having a direct relationship with any political party. At the end of the day, they should assist the government of the day and the country primarily, in achieving full employment.