Unions: Hindrance to business or essential for free markets

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Union Logos

WASHINGTON, August 31, 2014 — The 2014 annual celebration of the American labor movement in Michigan − a state that has long been a towering symbol of union power − is being marked by the effects of the Wolverine State’s so-called “Right to Work” law. Among other things, the new law offers employees of the Michigan Education Association a choice over their union membership.

Where the results of the 2010 midterm elections led to the infamous public union protests against Wisconsin Governor Scott Walker’s 2011 initiatives to limit the collective bargaining power of those unions, the ensuing political fallout cleared the way for Michigan’s own 2012 changes to collective bargaining laws.

But strangely, despite the ongoing economic hardships for working Americans resulting from the Great Recession, the 2014 midterm elections are being dominated by foreign policy concerns. Immigration reform appears to be one of the few major issues being widely discussed that even relates to jobs.

People who believe that unions only add costs look at “right-to-work” laws as prudent and beneficial to workers. The problem with this perspective is that it assumes employers will serve employee-interests by offering employees viable wages and reasonable working conditions instead of suppressing wages and creating abusive work environments.

For executives and people with elite schooling and wealthy family backgrounds, this issue is of little concern as they have the leverage to negotiate as individuals. But when it comes to unskilled workers with little leverage in their industry and workplace, collective bargaining offers them leverage over their employers who could otherwise undermine their demands by simply replacing them.

Markets work most efficiently when fundamental forces like supply and demand can interact to properly price goods and services. If drivers could simply dictate what they want to pay for a gallon of gasoline, the price would fall to an unsustainably low level, leading to a shortage of fuel for all.

The same is true of employers, the consumers of labor. When their employees must compete against each other and their own interests for jobs, compensation can plummet.

Absence of collective bargaining helps drive overall payroll costs down. This means lower pay, lower standards of living, smaller tax bases, and less consumer spending over time. In other words, a weaker economy exists when the bulk of workers do not have adequate leverage in the job market.

When employees can work together to help ensure that their interests are met, they improve their prospects and the outlook of the economy.

Ironically, American society constantly speaks of free enterprise, but then uses government as an instrument to undermine the collective bargaining rights of U.S. citizens. Many Americans even believe that the use of stock exchanges “democratizes” the pricing of commodities and the ownership of corporations. Yet at the same time, they justify actions against American workers because unions increase costs.

Where unions help sustain middle-class incomes and standards of living for a broad range of employees, wealthy business elites looking to earn substantial capital gains when stock prices peak − often  due to high-frequency trading algorithms or even collaborative speculation − frequently exploit stock exchanges and mechanisms to push up prices.

By means of political pressure, dubious legal measures and federal policies such as supposed “free trade deals” that have too often hurt the U.S. domestic economy, American public officials have intentionally undermined a key segment of free enterprise system despite their professed devotion to it. Attacks on collective bargaining are clear examples of government overreach.

That said, a downside to now-waning union influence can be a lack of competitiveness that results in lower workplace productivity and poor employee discipline. But this is a scenario more effectively addressed by healthier employer-employee relations.

Historically, relationships between employers and unions have often been hostile due, in part, to the fact this free enterprise solution to unhealthy, abusive business practices was born in an era of violent corporate reprisals against America’s fledgling unions.

The ultimate solution today is not a regression into that violent era, nor is it to mount a new effort to eliminate collective bargaining in this century. Rather, it is to improve communication between managers and union workers for the betterment of business as a whole.

Unions and other collective bargaining organizations have their faults, which must mainly be addressed internally. Yet they are still a key part of a healthy economy.

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