Hidden cost of unions

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 A labor union or trade union is an organized group of workers who unite to make decisions about conditions affecting their work. Labor unions strive to bring economic justice to the workplace and social justice to our nation. 


“Labor unions bring economic justice to the workplace”, a quaint idea that seems to present labor unions as the last line of defense against ever the greedy capitalist ideas of the elite in America. The truth is that unions often act as monopolies in labor, a group of workers banding together to artificially increase the price of their employment, which economists coin as a cartel. By restricting the supply of labor available, they can win higher wages and better benefits for union members, at the cost of non-unionized workers. This eliminates the total number of employment opportunities available or forces nonunion workers to work for worse pay. The rise in the cost of labor, also forces the final price of the good to increase, raising the cost of living for the workers.


Graphical representation of the deadweight loss of labor unions

Another issue that labor unions could bring to the workplace is the allocation of scarce employment opportunities. When there is a shortage in a previously competitive market, often inequitable methods of distribution are formed. Instead of assigning labor to the workers who are the most efficient or have the lowest opportunity cost, unrelated factors, such as race, gender, or religion, can decide who gets a job and who remains unemployed. Historically, unions have excluded minorities from employment opportunities and have been violently opposed to the introduction of non-union workers who did their jobs for lower pay. Another reason that unions are considered undesirable is the idea that under-the-table payments, often to union leadership, breed corruption and often simply make up the difference between union pay and the competitive equilibrium.

Comments

  1. Nathan WangOctober 27, 2024 at 8:04 PM

    Really interesting to look at labor unions completely outside the context of sweat. Its important to see the completely non-emotional theories of economics before making any judgements about unions aswell as many other topics that will come up in Sweat. Nice!

    ReplyDelete

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