In the business world, many industries deal with labor unions when negotiating pay rates and benefits for employees. While unions have helped workers and business in some ways, they also cause problems for both parties as well. They also have a negative impact on the economy as a whole.
Separates Workers and Employers
One of the potential disadvantages of labor unions is that they work to separate workers and employers. A labor union essentially pits one side against the other. In negotiations, the labor union wants what is best for the workers and the company tries to retain as much of its money as possible. With this type of arrangement, it can be counterproductive when trying to work together effectively. This often leads to tension between the two parties in the work environment.
A labor union can also have negative impacts on the economy and the employer. A labor union is essentially a group of employees that bonds together to fix the price of labor. This is basically the same thing as creating a monopoly, according to the Federal Reserve Bank of Minneapolis. When a company does this, it is against the law. When workers do it, it is simply part of being a labor union. This affects the prices that companies can charge for products and services.
Another disadvantage of labor unions and collective bargaining is that they create extra complexity when it comes to hiring and firing employees. Before an employee can be hired, he must be a member of a labor union. Some potential employees do not want to pay for a union membership unless they are sure they will get a job. Then, when a company needs to fire an employee, it has to abide by the rules set forth by the collective bargaining agreement.
Halt Business Progress
When labor unions and collective bargaining are involved, there is always the threat of a strike. When a strike occurs, the workforce stops working and producing goods or services for the company. This can halt business operations until the disagreement is solved. In the process, customers might move on to other providers of these goods and services. A strike can set a company back in its growth and make it more difficult to please customers.