Labor Unions

Labor unions are determinal for the economy. They increase overall unemployment and increase the prices of regular consumer products. How do they increase overall unemployment? Simple. A business has revenues and costs. The business uses the revenue to pay off the cost, and the remaining money (if there is any) is profit. Unions forceibly raise wages for employees. This raises the amount of cost they pay, which reduces their profit, and a lot of times forces the company to endure a loss. If the business is incurring a loss, they are forced to either reduce costs or increase revenue. The only ways to reduce costs is to shrink the company, which will inevitably result in the loss of jobs, or to directly reduce the amount of employment, which of course raises unemployment. The only way to increase revenue is to increase the costs of products, which in the long run will not work as the demand curve will shift to the left, resulting in negligable increase in revenue. "It is simple economics. If labor costs are higher than the market determines they should be, after taking into account all other factors that make up production, then workers will be laid off or their compensation will be decreased. The "greedy capitalists" (derisively called "management" by the unions) aren't the culprits for wage pressure. It is ultimately the consumers of products who are the drivers of wages, not management."[1] "By restricting the number of eligible workers in an industry, unions essentially decrease the labor supply, shifting the labor supply curve upward. As a result, the existence of unions increases the average wage above the level that would naturally occur in the market. Yet the intersection of the new labor supply and demand curves also occurs at a lower employment level. Thus, there is a higher level of unemployment, as essentially businesses can afford to hire fewer workers at the elevated wage."[2] "Raises the wages of workers above the market clearing level and creates a situation in which there are more people who want to work at the wage than there are firms who want to hire at the wage. In this way, labor unions increase the wages and benefits of workers who are employed, but may simultaneously increase the number of workers who are unemployed."[3] "It has been a well-established fact that unions reduce the numbers of employed workers by mandating wages that move in an ever increasing upward spiral. (The average union wage is 28% higher than a non-union wage). In such situations, cash for hiring new workers diminishes as does cash for R&D and capital improvements."[4] How do they raise consumer prices? I mentioned this earlier, so I will just use sources. "Furthermore, those high union-mandated wages result in increased prices for manufactured goods. It has long been an established fact that as labor costs increase, demand for consumer goods diminishes and the pool of consumers shrinks."[4] "if unions successfully raise the price of labor, employers will purchase less of it. Thus, unions are a major anticompetitive force in labor markets. Their gains come at the expense of consumers, nonunion workers, the jobless, taxpayers, and owners of corporations."[5] More reasons labor unions are bad: "How are our guys supposed to compete when the Japanese, Korean, and others don't have to wrangle with greedy, thug union bosses over guaranteed, absurdly high wages, pensions, and health benefits? In Japan, the labor market functions like any other commodity market. That's why their cars are affordable and their companies are profitable."[6] "Labor unions tend to be inclusive. Those who choose to join the union gain all the benefits, but it may be at the expense of those who aren't members. That can cause strife within a company where certain employees, based on their job duties, are offered membership, while other employees have to work in conditions not quite as favorable. Corporations find that having a labor union within the company is not cost effective. Other employee salaries are kept at minimum wage or there are no health benefits due to the high cost of employing labor union members."[7] "By raising the price of labour, the wage rate, above the equilibrium price, unemployment rises. This is because it is no longer worthwhile for businesses to employ those laborers whose work is worth less than the minimum wage rate set by the unions. As such, Governments may seek to reduce union powers in order to reduce unemployment."[8] "One 1951 study found that instead of harming profits, unions increase the wages of about 10–15% of workers by reducing the wages of the remaining 85–90% of workers."[8] "If unions succeed in wage hikes, and employers raise the prices they charge consumers to maintain their own profit margins, and the supply of money remains the same, then something else has to "give." Either the prices of goods and services in nonunion sectors have to fall and offset the union sector hikes, or people's cash balances need to fall, in terms of their purchasing power."[9] "The analysis finds small impacts on all outcomes that we examine; estimates for wages are close to zero."[10] ==Final Conclusion== As shown, unions either raise unemployment or increase prices (depending on the individual business's choice). They increase the costs businesses incur and must resort to these methods in order to return to their normal budget. But they also encourage sloth and laziness by employees. They also are getting rather useless as new federal policies replace their jobs and duties. ==Sources== [1]:http://www.minyanville.com... [2]:http://www.ehow.com... [3]:http://www.sparknotes.com... [4]:http://stephencabotblog.com... [5]:http://www.econlib.org... [6]:http://therightrant.blogspot.com... [7]:http://www.corporatehx.com... [8]:http://en.wikipedia.org... [9]:http://mises.org... [10]:http://www.economist.com...