What is a Labor Union?

A labor union is an organization that advocates for workers' rights and benefits through collective bargaining.

How a Labor Union Works

Labor unions represent workers in both the public and private sector. Individual labor unions represent workers in specific industries and function in an intermediary capacity between employers and employees. Unions negotiate directly with employers on employees' behalf with regard to compensation, conditions and working hours.

Workers employed by transportation, shipping and manufacturing companies typically maintain contracts with labor unions. The unions agree to engage employers in collective bargaining in return for union dues withheld from payroll. The International Brotherhood of Teamsters and United Steel Workers are two prominent labor unions in the U.S.

Why Labor Unions Matter

Labor unions protect workers from exploitation and ensure fairness of pay as well as safe, reasonable working conditions. However, many economists argue that labor unions have a distortive effect on the labor market that results in decreased efficiency.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.