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Labor unions are organizations that represent employees’ interest in a collective bargain. Collective bargaining refers to negotiations between an employer and a group of employees’ representatives with an aim of reaching agreements that determine working conditions. After the bargain, a collective agreement reached.
Unions are formed to protect workers against employers by laying down rules to govern job terminations, promotions, and layoffs. Workers have hence been able to appeal their cases by the aid of the laid down rules. Labor unions provide more job security and chances for job promotions compared to nonunion workers counterparts.
However, the unions have been of great hindrance to productivity and overall benefits of a company. The bargaining agreements require firms to maintain a specific number of workers. This poses a challenge during slow economic periods since the organization has to keep to the number of workers dictated by the bargaining agreement. Unproductive workers increase firm’s costs due to its inability to decrease the number of unionized workers. Organizations are required to hold special negotiations in case they need to reduce the number of employees.
Increased labor mobility and business competition in recent years has hindered the effectiveness of labor unions. The shift from large manufacturing companies to small sized companies operating outside of manufacturing has blurred the line between a worker and a manager. Computers have increased productivity resulting to the decrease in the number of workers needed for a job.
Economists view labor unions as cartels whose duty is to raise wages by restricting labor supply to various firms. By raising wages above competitive levels, the number of jobs in the unionized companies has greatly reduced. This has its bases on the law of demand, employers purchase less labor due to the raise in labor price. As labor unions succeed, product prices rise and investment flow from the unionized industries forcing customers to seek alternative cheaper goods and services from non-union industries. Less investment in unionized firms makes them less competitive.
The gains experienced through the unions are usually an expense to the company owners, nonunion employees, consumers and the taxpayers. Most of these unions are monopolies in nature hence fix the high prices on legal privileges given by the government. These legal privileges include an exemption from tax and antitrust laws. Economists regularly find that unions cause the vast loss of jobs in the economy.
Labor union representatives and the organization representatives usually take time in negotiations. In most cases, new contracts gain approvals before old contracts to ensure continuity of their operations. These delays results to strikes by either the union workers or organization workers. Most of the unions also support restrictions on imports through tariffs and quotas. The increase in domestic goods increases domestic productivity and domestic labor wages rise.
Unionization has significant changes in work places apart from the job and wage effects. Unionized organization employers are forbidden to directly negotiate with workers. Discussion on matters concerning the employee has to be between the union and the employer. This limits the employer to take immediate action on performance. In addition, employers pay a lot and spend much time in negotiations before making changes in their organizations. These procedures and expenses force the employer to overlook many mistakes leading to organization loss.
Labor unions formation can however be avoided by organizations offering better benefit packages to workers. Treating the workers with dignity and respect builds workers’ trust toward the organization demotivating their need to form unions. Unionized organizations often struggle to maintain their stand in a competitive economic market achieved only by producing affordable consumer goods. This struggle as a result limits the benefits offered to their workers.