Labor Unions and Credit
Labor Unions
• Association of workers organized to
improve wages and working conditions for
its members.
• A group has more power than an
individual.
Development
• Poor working conditions in factories in the
1800’s.
• Workers were fired for no reason.
• Workers were often blacklisted.
Knights of Labor
• Founded in 1869. Attempted to organize
all laboring people.
• Terrence V. Powderly became their leader
after 1879.
• Membership increased to 700,000
between the years 1885-1886.
• Began to decline and ended in 1900.
American Federation of Labor
• Organized in 1886.
• Accepted only skilled workers. Women, AfricanAmericans, and immigrants were not accepted.
• AFL had separate unions for different crafts.
• Samuel Gompers was president of the union.
He wanted higher wages, shorter hours, and
benefits for disabled workers.
• Between 1890-1900, membership reached
500,000.
Union membership policies
• Closed Shop: Companies hire only union
members.
• Union Shop: Worker must join the union
after a specific time period.
• Agency Shop: Not required to join the
union, but must pay dues.
• Open Shop: Companies may hire workers
regardless of membership.
Collective Bargaining
• Process where union leaders and employers discuss
employment terms.
• Compromise is the main issue.
• Three steps: Negotiation, mediation, and arbitration.
• Negotiation: Labor and management meet to discuss
contract issues.
• Mediation: A neutral person helps both sides reach
agreements. The Federal Mediation and Conciliation
Service will provide a mediator.
• Arbitration: Two sides submit issues to a third party for a
final decision.
When Collective Bargaining Fails
• Strike: Workers refuse to work.
– Picketing: Discourage workers from working.
– Boycott: Refuse to purchase goods or
services from the company.
– Scab: Worker willing to work on company
terms.
• Lockout: Management prevents workers
from working.
Credit
• Receiving something with the promise of
payment at a later time.
• Principle: Actual cost of the good or
service.
• Interest: Amount paid for the use of
money.
Charge Accounts
• Buy goods and services at individual
stores and pay for them later.
• Credit limit: Maximum amount a person
can buy with the promise of payment at a
later time.
• Three types of accounts are installment,
regular, and revolving.
Account facts
Installment Account
Regular
Repaid with equal amount.
A bill is sent at end of cycle.
Mortgage: Loan on property. Can not be used again until
the balance is paid off.
Revolving
A bill is sent at end of cycle.
Can continue use as long
as the balance is below
credit limit.
Credit and Debit cards
• Credit cards: Make purchases without cash.
– Used to purchase items and receive loans.
– Charge high interest rates (Avg. 18%) in the 1990’s.
– Lower interest rates if the customer is “reliable”.
• Debit Cards: Transfer funds electronically.
– Popular use in Automated Teller Machines (ATM’s)
– Now can be tied directly to checking accounts (check
cards)
Applying for credit
• Fill out an application.
• Credit Bureau will do a credit check.
Creditor will ask for references.
• This check gives your income, debt, and
ability to pay debts in the past.
Credit Rating
• Rating of risk: Excellent, good, average, or
poor.
• This gives the lender an idea of reliability.
• They also look at capacity to pay, character, and
collateral.
• A secured loan is a loan based on collateral,
something the borrower is willing to give up if the
loan is not paid back.
• An unsecured loan is one based on reputation.
Government Regulations
• Equal Credit Opportunity Act: A person
can not be denied credit because of race,
religion, national origin, gender, marital
status, or age.
• Usury laws: Restrict the amount of
interest companies can charge.
Bankruptcy
• When debts are so large, that they can not
be repaid.
• Most of what debtors own is given to
creditors.
• It is very hard to re-establish credit.
Financial Institutions
• Commercial banks: Main functions are accepting
deposits, lending money, and transferring funds.
• Savings and loan: Very much like commercial banks.
Normally smaller banks.
• Savings banks: Original purpose was to help those
overlooked by large banks. Sometimes charge higher
interest rates.
• Credit Unions: Offer high interest on saving and low
interest on loans. Must be a member to use their
services.
• Finance Companies: Charge high interest rates. Used
by those with bad credit history.
Finance Charges and Annual
Percentage Rate (APR)
• Finance Charges: Cost of credit
expressed in dollars.
• APR: Cost of credit as a percentage. May
differ from place to place.