Labour Unions Essay Example

Labor unions serve a critical role in the economy of any country. The impacts of labour unions go beyond setting higher wages for their members. It affects the consumer powers of the employees and indeed the citizens, levels of inequality, and the minimum wages of all citizens.
In the USA, it is evident that at the times of peak unininisatiosn-1960s and 1950s, the levels of inequality remained lowest. One may wonder how such came to be. First labor unions undertake to seek better terms of the workers by collectively bargaining for higher wages. A union that aims to have an increase of the salaries of its member draws attention as opposed to individuals.
Capitalist tendencies hold that one aims to make maximum profits from the minimum investments. Therefore, the absence of unions in the private sector gives the managers and the CEOs a loophole to gain maximally at the expense of the workers. It is evident that in 1970s, the lowly paid, and the highly paid worker did not differ by more than 20 times. In the current state of affairs, the CEOs earn up to two hundred and ninety-three times more that lowest paid. Such an inequality results from the reduced unions in the private sector. The CEOs do not mind the welfare of the workers at least as it is not legally binding to pay anyone more than the legal minimum wage. However, union can turn these events and demand more.
In this situation, even the companies would not benefits maximally as the goods they produce would not have ready markets within the country. One may be tempted to argue that such does not necessary occurs as the companies may export the goods. However, it is critical to note that some good and services are culturally affiliated and cannot be exported. On the same case, not tall companies have the capacity to export their products.
When the consuming power is low within the country, hiring more workers stalls, some are are retrenched, production reduces, some companies collapse, etc. All these aspect culminates to a slowed economic growth. With a high number of unemployed people, the purchases power further declines. The level of inequality between the lowest paid employees and the highest increases due to lack of collective bargaining.
One major twist of union is that they do not raise the wages of the members only. Non-unionized workers benefits in that the negotiation of the unions acts as the basis upon which the country determines the minimum wage. The negotiations do not limit to the union members as any laws made due to their activities of unionized members applies to all employees in the country.
However, it is noteworthy that even with the unions; there is a maximum level that any firm cannot pay. The theory of labour productivity and wages hold that a firm that seeks to maximize profits shall hire workers up to the point where the marginal revenue of the employees is equal to the wage rate. Beyond there, it is inefficient for the firm to pay its workers more. If the company pays more it shall make losses as it will earn less revenue.
Therefore, the productivity theory acts a shield against unions that tend to demand more wages beyond the capabilities of the firms. Nevertheless, such does not reduce the work of the unions to mere nothing. The unions gang against the firms to thwart their attempt to rig the policies to their favor. Some policy makers have made deliberate efforts to reduce the effects of the unions from the capitalist owning the means of production as indicated the declining power of the unions.
The morale of the workers is increased by among other things the feeling that they have a good representation in the unions. With the reduced unionization in the United States of America, the morale is low, leading decline in productivity. A fall in the morale among the workers leads to low productivity that negatively affects the whole economy. Moreover, reduced unions make the firms take advantage and make the working environment improper for the workers. Such has an overall reduction of the motivation, productivity, and eventually may lead to reduced work output.
However, some unison tends to hold labor in particular sectors to create a shortage. By so doing, the labor union increases demand and make the wages increase. Such a method might hurt the economy since cartels of that nature may affect critical sectors that would lead to a high cost of goods or services. An increase in the cost of products and services would result in reduced consumption hurting the economy.