Good Honest Dollar $$

In today’s post, I would like to commence a  two-part discussion in relation to the issue of whether or not employees should have a right to form and belong to a trade union.

To many in the western world, such a right is beyond legal and moral dispute, and in my view, the option to join a union (as well as the option to refuse to join) is a right to which workers should be entitled.

Nevertheless I feel that challenging the notion of union membership as a fundamental right is a worthwhile exercise, particularly as unions are disallowed in some countries.

Accordingly, today I would like to outline and discuss two common objections toward the concept of unions. Next week, I will highlight and discuss the case in favor of unions, and why I believe workers should be permitted to bargain on a collective basis via membership of a union.

 
The case against unions
Trade unions are subject to an extremely wide range of criticisms, springing from a variety of sources.

Today, I would like to focus on two areas of criticism in particular – that unions have a harmful impact upon the economy and that they are anti-competitive in nature.

 
How collective bargaining is anti-competitive
Anti-competitive behavior is generally frowned upon in much of the western world – in particular the practice of firms engaging in collusive behavior with other (competing) firms in order to maximize the prices they receive for their output.

Such practices are generally considered to be unfair and a hindrance to the effective functioning of a competitive marketplace.

But aren’t workers doing the same during the collective bargaining process? They are. Where staff employed in a particular industry join together (in a union) to bargain on a collective basis, this too represents a form of collusion – individual workers colluding with each other in an organized effort to maximize the price which they receive for their labor.

Moreover, in cases where the majority or entirety of the workforce within a given industry is represented by a singular union, such a union effectively operates from the position of a monopolist during the bargaining process, and is able to exploit its position to make unfair or unreasonable demands upon employers.

In a fair system, all classes of economic participants should be given equal rights, and the rules as to what is considered to be acceptable conduct or otherwise should apply equally to all. Why then should employees, as one class of economic participants, be allowed to engage in collusive behavior when other classes are not? 

 
Unions and the economy
A second objection to the concept of unions, and one which I do not feel is particularly strong, relates to their economic impact.

Critics say that the collective bargaining process results in higher unemployment as well as higher consumer prices than would otherwise be the case if collective bargaining were not allowed.

According to this argument, collective bargaining increases the negotiating strength of workers, and thus leads to higher wage settlements and therefore higher labor costs. This, in turn, leads to two negative economic effects: 

• Higher consumer prices, as firms seek to protect profit margins in light of higher labor costs; and

• Higher levels of unemployment, as higher wage levels result in a reduction in demand for workers.

I do not feel that this argument is particularly strong. Given what I feel is a strong case for unions (see next post), I feel that any adverse economic impact of their formation would not be a sufficient basis upon which to disallow the practice of collective bargaining.