Unions Increase Consumer Prices

I was eating my lunch today, and I realized that there’s a group of people that I still haven’t offended yet. Keep in mind as you read this that I am in management, and have a business degree, and am about to start an MBA, so this is all skewed with that perspective. That being said, I think that if you are a reasonable person, even if you disagree, that you will see logic in my arguments.

Here’s the belligerent question: “Why the heck would someone want to pay dues to some sleazy guy in a nice suit so that he can negotiate minimum wage for the union?”

I’m not implying that all union employees get paid minimum wage, but some do. Think about that. These union members pay dues to the union out of their paycheck when they are getting paid minimum wage… i.e. the lowest amount of money a company can legally pay them, union or not. And then there’s your average union worker that makes more money than he should. Those are the ones I am going to focus on.

When unions were first created, there were good reasons. For one, management of companies were corrupt, and almost completely unregulated. Laws protecting employees were not yet written. There was no OSHA, no Title 7, no EPA, etc. Management would force people to work for near slave wages, and the people had to work, because a little bit of money is better than no money at all. People were forced to work in dangerous, dirty, terrible conditions, and didn’t have a choice. They couldn’t complain to anyone, because no one cared. So they banded together, and used the strength of their numbers to get changes.

Then the government started creating laws and organizations to protect workers. Companies were forced to comply with laws making the workplaces safer, and ensuring that people were hired without prejudice. They created a minimum wage. Granted, you won’t be living on Park Place making minimum wage, but you’ll be able to get a section 8 apartment and enough food for your family.

Here’s my question: Why would a company pay 30$ an hour for a job if there are scads of people willing to do the same job for 15$ an hour? The answer of course is, they won’t! And they shouldn’t. Just like prices seek equilibrium, wages do the same. Let me give an example… If you take a limited supply of a product, say bread for istance, there will be a certain amount of money chasing that good. So the price will be determined by whatever consumers are willing to pay for a loaf of bread. If consumers are not willing to pay what the bread is worth, then companies will stop producing bread.

Translate that into unions. Bread = Labor, and Price = Wages. If the labor is too expensive, the company won’t pay the wages, and instead they’ll shut down the plant and relocate somewhere that doesn’t have a union, like Mexico for example. It happens all the time, and it’s a good business decision. If the company doesn’t offer sufficient wage to attract labor, then they will have no one to work in their plants, and then they will have no product to sell, and have no profit. So it is a delicate balance. The labor wants as much money as possible, and the company wants to pay as little as possible. When they agree, they reach the wage. And you don’t need a union to reach this equilibrium. Unions may artificially jack up the wages for a while, but the company will find a way, albeit passive-aggressively, to either phase out the union, or find ways to stick it to those people, because frankly, it resents them.

And who can blame them? It’s just good, simple economics. He who is willing to work for the lowest wage gets the job. He who is willing to pay the highest price gets the product. It’s time to embrace the free market that we all swear by. Imagine buying a new GM car for 5,000$.

Let’s not forget the simple truth that companies paying higher wages will not settle for smaller profit margins. They will pass the cost of labor on to the consumer, i.e. YOU & ME! Frankly, you and I are smart enough to know that if GM can’t figure out how to make a good car cheap, we are going to go buy a Toyota and GM can kiss our grits. It’s just reality. Of course there will always be some fanatics that say “Buy American” even when buying American is a poor financial decision. But we will get the last laugh because we will have more disposable income.

I look forward to it.

  10 comments for “Unions Increase Consumer Prices

  1. November 30, -0001 at 12:00 am

    AUTHOR: Jackie You said A),2), and d). The older brother said that on Home Alone. My husband and I say it all the time, it took me a minute to remember where it came from and why I say it too.

  2. HRT
    November 30, -0001 at 12:00 am

    AUTHOR: HRT Jackie-Chan: Try as I might I’m not seeing the correlation between anything that I wrote and “Home Alone”

  3. November 30, -0001 at 12:00 am

    AUTHOR: Jackie HRT: Was that a “Home Alone” thing you did there?

  4. November 30, -0001 at 12:00 am

    AUTHOR: Nero Now if only the rest of the world knew that people would only charge what other people would pay, maybe movie prices woudln’t be $10 and popcorn with a small drink and a regular size candy bar wouldn’t cost $15. Bollocks!!

  5. November 30, -0001 at 12:00 am

    AUTHOR: Wendy As a rule, I think the whole employment experience is overrated. It don’t make a good goddamn how well you do your job or how long you do it. When it comes to the company making a little more money (thanks to you) your ass will be put out on the street with little more than an echo of “Thanks for coming schmuck!”

  6. HRT
    November 30, -0001 at 12:00 am

    AUTHOR: HRT Interesting…not entertaining, but interesting. I’m tempted to post my own rebuttle, except that it wouldn’t actually be a rebuttal because I actually agree for two reasons. Reason A) I’m a lot closer to a business owner than I am to a “worker” 2) I may have employees at some point and d) I worked for a company who had only two classes of workers union members and managers. And quite honestly I resented having a significant portion of my salary confiscated for union dues when I knew that I had no intention of working for the company long enough to reap the benefits for my union involvement… Still I’ve got my Teamsters card so when the class warfare gets bloody I’ma wave that sucker like the bitch that I am.

  7. November 30, -0001 at 12:00 am

    AUTHOR: Wendy Well how did like that little lesson in Incredinomoics folks? I now know why I quit college. It was so effing boring.

  8. November 30, -0001 at 12:00 am

    AUTHOR: Professor Incredipete We can’t all be superstars, Jackie.

  9. November 30, -0001 at 12:00 am

    AUTHOR: Jackie Incredipete, thank-you for the stunning revisit to Economics 101. I hadn’t thought about that boring crap for ages. I agree with what you said about the unions though. Also what do they do for your retirement?Nothing. It will be 401K all the way for me.

  10. November 30, -0001 at 12:00 am

    AUTHOR: thea I’m all for pretty much anything that’s disposable, … namingly thongs, (flip flops – u pervs….) one-night-stands, and the occasional mental breakdown.

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