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Steven Malanga : What role do workers' unions play in an economy? / Clear, concise arguments and answers from leading thinkers / Eristical.com
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Steven Malanga

Private workers’ unions play a diminishing role in the economy, partly because once we move to a global marketplace, the costs that they impose through higher wages and benefits in industries where pricing is very sensitive, makes the unions a liability.

The industries where there is value in domestic production, making moving overseas difficult, are more specialized and have a more highly educated workforce which isn’t as disposed to unionization. And it’s mostly true that in these kinds of industries, the workers who possess these skills find themselves in a stronger bargaining position than that of low skilled workers who rely on the strength of the union rather than the strength of their qualifications.

Public sector unions (representing government workers) are different than private sector unions because they aren’t subject to the same competitive pressures. For example, a company may outsource jobs to India in order to reduce costs and remain competitive, but government jobs can’t be outsourced to India because those are inherently local jobs.

The government also doesn’t face the same competitive pressures because by its nature, government is not simply a monopoly, but a monopoly that never goes away. Unlike private businesses which disappear after bankruptcy, when a government goes bankrupt, the taxpayers have to bail it out because it must go on. So unionization doesn’t really disappear in the public sector because competitive pressures don’t bear down upon it.

Contributing editor of City Journal and Manhattan Institute senior fellow, Steven Malanga