Recently while waiting to punch in for work I saw a poster for a scholarship essay contest. The contest was put on by the local union that represents workers at my place of employment. As a student of Classical Liberalism and Austrian economics the subject of the essay was of interest to me: “Describe what you feel are the benefits of union membership.” The assumption that everybody believes Unions are beneficial led me to think of all the ways union membership is not beneficial to members of unions or to non unionized workers.
The first unbeneficial effect of unions is that they artificially drive up wages that it’s’ workers earn. What does artificially mean? This means that the wages that union workers make is above what their labor would be worth according to supply and demand. It is a number that is pulled out of thin air and has nothing to do with the workers productivity and worth to the company. It is based on what the worker “deserves” according to an organization that doesn’t even know the worker. You might be wondering how this hurts anyone. Well people are rational beings so they attempt to find work at this wage. However the supply of labor at this rate is more than the demand which leads to an unemployment rate higher then would be the case with a lower wage. Unionized companies are then made less competitive with non unionized companies. Just look at what has happened to the clothing and automobile industries in America. Murray Rothbard one of the foremost free market economists stated that unions can only achieve a higher wage rate for its workers at the expense of lower wages for all the other workers in the economy. Secondly union wages are inelastic downward, which means that they are not able to change with the dictates of supply and demand like other commodities. This leads to unemployment.
The rules that unions make that govern working conditions make the workers less productive then they would be in a free market, which makes them less profitable to employ, while also lowering the standard of living for everyone else. Jobs banks in the automotive industry, where workers are paid nearly full wages while not working come to mind. F.A Hayek the Nobel Prize winning economist contended that high union wages can only be maintained by high inflation. This in turn means that the central banks will continue their policy of printing money to maintain the level of employment. Government controlled fiat money leads to the bubble and bust cycles that we are living in today, according to the Austrian School of Economics theory of the business cycle.
What are the effects of the individuals working in unions? First and foremost you lose your freedom to choose. Just by becoming an employee of my company you become a union member. I didn’t want to join but because my state is not a right to work state, it is mandatory. If I wanted to revoke my membership union dues would still be deducted from my pay and physical and mental abuse by union representatives would be a possibility. Also when a worker can’t negotiate for his own wage he loses the incentive to work hard because he gets the same wage as the workers who aren’t as productive as him. Unions also get special privileges from the Government. Union workers must make up a certain percentage of the workers on Government projects. This hurts non union workers and the taxpayers who pay more in taxes to pay for the more expensive labor.
In my opinion the way union dues are used is another detrimental part of being in a union. The union that I’m in has newsletters that update us on their fight against Wal-Mart and their support of Democrats running for office. How does this help me or the other members that don’t support these policies? Lastly I have a personal story. A co-worker of mine went to the union because they didn’t like the fact that I was getting hours that they wanted. Because unions go by the policy of seniority the hours were given to my co-worker. This despite the fact that I was told the company would rather give me those hours. How does this benefit me, the company or the customers? Multiply this by the thousands of other times this happens around the country and you get a picture of a very inefficient and unfair system. Hopefully in the future there will be a truly free labor market where individuals get to negotiate for themselves the best wages and benefits they can get without any middlemen with their own agenda.