Unionization Pros & Cons
Labor unions act as middle men between employees and managers, trying to negotiate improved and safer working conditions and better wages for their members. Despite their positive intent, however, unions can also have detrimental effects on a company's economy by pressuring companies to spend more money on their labor force.
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Wages
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Unionization in the workplace usually leads to an increase in wages and benefits for employees in that industry. This in turn should lead to an increase in life quality, as workers have more disposable income to spend in their leisure time. Despite this apparent advantage, however, the gains may not be as clear cut as they first seem. According to Doug Clement of the Fed Gazette, these higher wages are often funded by companies increasing the prices of their products and services, meaning there is no real gain to be had through increased wages. Clement also argues that by continually pushing for wage increases, unions disrupt natural market forces (where lower paid workers could be taken on), causing an inefficient distribution of a nation's human resources.
Equal Rights
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Equality of wages is a key factor in judging working conditions in industries with a strong union presence. David Card, an economist at Princeton University, carried out research in this field and concluded that the decrease in unionization among private sector companies may account for up to 20 percent of the increase in wage inequality among males from 1976 to 2001. However, Card also noted that the decrease in unionization of private sector companies has had a negligible effect on the wage inequality among women during the same period.
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Production
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Unionization of workforces can lead to significant improvements in the relationship between management and employees, as workers have a viable go-between to sort out any disputes. Workers can also push for improved health and safety conditions and full training to complete the tasks for which they were hired. These factors are likely to lead to better working conditions for any unionized industry. However, according to Richard Freeman, an economist working at Harvard University, these results vary substantially according to industry sectors. Freeman's research indicates that only around two-thirds of studies conducted show some level of improvement in working conditions, whilst the remaining third actually show a negative impact following unionization. Freeman also points out that the wage increases unions negotiate are not matched by increased productivity, leading to an adverse relationship between companies and unions.
Employment Levels
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A unionized workforce tends to enjoy higher wages and improved conditions, but union presence also restricts the number of jobs in an economy. This can happen by a union demanding caps on the number of workers who can enter an industry, or through the economic pressure put on companies to pay higher wages, meaning they are limited as to how many workers they can afford to pay. This can lead to companies researching mechanical production methods that are less reliable than human labor. Clement, writing for the Fed Gazette, suggest that studies conducted in Canada, the United States and the United Kingdom have shown employment increases in unionized industries to be around three percent lower than in non-union companies. So, although unions protect their members and improve their conditions, companies in unionized industries may take on fewer employees due to the increased expense.
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References
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