The Case Against Labor Unions

It is a common belief amongst the general population that labor unions work in the interest of the laborers. In fact, they believe that the power that collective bargaining gives these workers is probably the only thing that prevents their exploitation at the hands of greedy corporations. They had all heard about the history of subsistence wages, long work hours and also inhuman working conditions that were the norm when robber barons made their money.

However, that is not the case. When one pays close attention to what the labor unions do, it becomes clear that these organizations do not work in the interest of the workers. Instead, they work against their interests.

Unions Act as Monopoly

Workers do not have a choice to democratically elect their union. When they join an organization, there is only one union in that company. Workers, therefore have to become a part of that union. Not choosing a union or choosing a different union are not options that the workers are given! Hence unions end up acting as a monopoly. Since they have no competition, they can collect any amount they want in the name of dues.

Also, since labor unions are a monopoly, they have been used by several corrupt businessmen to avoid conflict. They help elect a union leader who is sympathetic to their interests. Since laborers do not have a choice, they have to follow what the union says even if it is against their interest in the short term.

Unions Cause Inflation

Even if the unions are not corrupt, they tend to cause negative effects. For instance, they are almost single-handedly responsible for causing price inflation. They tend to negotiate for unreasonably high wages even though there is no corresponding increase in productivity. Since this is happening throughout the economy, the government is forced to print money. As a result, the higher wages received by the workers are worthless since the real prices have risen and as a result, the real wages have fallen. The unions might think that they are helping workers by forcibly raising wages. However, in reality, they are only causing inflation.

Unions Cause Layoffs

Most products sell in a competitive market. This means that the companies face competition from local as well as international suppliers. They cannot pass on the price rise caused by higher labor costs to the customers. As a result, they have to get rid of laborers and bring down their costs.

Most of the times, companies prefer to go for mechanization and automation. Machines tend to be slightly cheaper than humans (because of artificial wage inflation caused by the unions).

Lower end jobs such as cleaning, janitorial and clerical work have been fully automated. The basic reason behind this automation is that companies are tired of dealing with labor unions and their unreasonable demands. They would instead pay the workers a severance and then continue their operations with the help of machines that do not cause any disruption.

Unions Cause Bankruptcy

The automobile industry is one of the most significant examples of how labor unions have practically destroyed the American workforce. The automobile industry was practically born in America. Companies like Ford, General Motors, and the others first set up shop in this nation. America still has the largest consumer base in the world when it comes to automobiles. However, the companies are close to bankruptcy and had to be bailed out by the taxpayers.

This is because the labor costs have risen so much that car production has become extremely expensive in the United States. It is much cheaper to manufacture a car thousands of miles away and then transport it, rather than make the car right there!

The automobile industry faces price increase from all sides. Even workers in steel and rubber industries (which act as input for vehicles) are unionized. This raises the cost of production in America whereas it is cheaper to produce in other nations. This is the reason why countries like Japan were able to flood the American markets and become the dominant players.

Unions Cause Outsourcing

By the 1990’s, almost all industries in the nation were tired of the oppressive tactics used by labor unions. Labor unions were never interested in win-win situations. Instead, they were interested in gaining at the expense of others. This is the reason that fiber optic cables changed the world!

When it became possible to work from remote locations, companies queued up to outsource their work. Outsourcing was extremely cheap because of two reasons.

Firstly, there were differences in the currency rates of two countries. This made one country’s money more valuable in another country. However, the main reason was that the third world countries did not have labor unions to raise prices. Hence, outsourcing became a proposition that was too good to refuse.

The irrational raising of wages ended with millions of people losing their jobs as corporations found viable alternatives at offshore locations!

To sum it up, labor unions do the exact opposite of what they are supposed to do. Instead of protecting the worker's interest, they end up harming them.

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Economics of Human Resources