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What role do workers' unions play in an economy?

Dinesh D

In economies there are private sector unions and public sector [government] unions. Public sector unions serve no useful purpose as far as I can see, and in fact there’s an inherent problem in even having these public sector unions. The reason for this is that normally, in the relationship, there is an employer who is protecting the interests of the company, in this case the shareholders, and a union who is fighting for the workers. Both sides have a kind of tug-of-war to find a reasonable compromise on workers’ wages while still preserving the profitability of the company.

The problem with the public sector union is that they are essentially bargaining with the politicians, who have a vested interest in giving into the unions which give them campaign contributions. Not only this, but the politicians aren’t parting with their own money, they’re actually parting with the taxpayers’ money.

So what you really end up with is a conspiracy of unions and politicians to rip off the taxpayer, which has been happening on a scandalous scale across the United States in recent history and is the reason so many states have approached fiscal crisis if not bankruptcy.

The private sector unions, on the other hand, have historically served a purpose. So I have no objection to collective bargaining in and of itself, but I do object to the sort of mafia style strong arm tactics that unions often use which sometimes reach such a point that they make the companies themselves unproductive.

A prime example is the way in which the unions in Detroit have dragged down the American auto companies. Japanese companies are making cars, not just in Japan, but also in non-union states, more cheaply and of better quality, which is the reason that Detroit has been having its problems.

Author, Commentator and President of The King's College, Dinesh D'Souza

Ben Shapiro

Workers unions play an important role in the economy unless they start beating people up. Collective bargaining is not anti-free market, rather, collective bargaining is an element of the free market and if workers get together and decide to strike for higher pay that's absolutely their prerogative. On the other hand, what is not their prerogative is to beat up those people who cross the picket lines, because at that point it's not a matter of economics. The fact is that you don't have a right to beat up person up just because there is a certain job which somebody is willing to fill for lower pay.

So unions have a role but only as long as there's actual unanimity and only as long as the workers actually agree to participate, but not if there's coercive behavior and bullying.

Syndicated columnist and author, Ben Shapiro

Peter Schiff

Labor unions tend to operate in a very short sighted manner, most often by attempting to maximize the pay and benefits of their members in the short term even as it ends up costing their jobs in the long term by bankrupting the employers. But while current employees might collectively benefit in the short run, the high cost of employing workers results in fewer employment opportunities for those who are unemployed.

On an individual level, because labor unions tend to bargain for wages collectively on behalf of their members, employers aren't free to pay individual employees based on merit or productivity. When employees are given equal pay for unequal productivity, it not only results in lower wages for better employees, it also reduces a company's productivity as a whole by reducing employee incentives to be more productive.

While labor unions are a legitimate force in a free market economy, they become a detrimental one largely because they're able to use their political clout to persuade politicians to enact laws which mandate union membership and certain worker benefits and protections which make hiring costs prohibitively expensive across the board, and as a result, most of the American companies which were heavily unionized have simply been bankrupted, resulting in a sharp decline in private union membership.

On the other hand, when it comes to government worker unions, these extra costs are simply passed on to tax payers in the form of higher taxes and rates. In fact, the entire process is corrupt because these unions help to elect the very government officials who they then negotiate with for exorbitant pay and benefits. In effect, nobody is looking out for the tax payer at the negotiating table while the unions are calling their own shots.

Economist, investment advisor, author and commentator, Peter Schiff

Star Parker

Workers’ unions reduce job opportunities and economic growth by distorting labor markets. What this means is that union policies tend to increase the cost of employing people and reduce the productivity of employees, which reduces the natural demand for employees and the supply of jobs. When employers are forced to pay higher wages, to provide more expensive benefits and to comply with burdensome regulations, they discourage employers from employing more people. And when the union sets the wages for employees and conditions under which an employee can be fired, rather than the employer making these decisions, it removes the employee’s incentive to work harder because his pay rate and employment aren’t tied to his effort.

Although unions tend to be detrimental, their policies are consistent with their founding. The best way to determine the nature and intentions of an organization is to look at their founding documents which articulates the reason it exists. As unsavory as it sounds, they were established in the United States to prevent African Americans from working. After the American Civil War when four million slaves were released, one million of them immediately left the south and started moving north looking to work in coaling and on docks, and because they were willing to work for less money, they undercut the wages of established workers. In order to prevent this, workers’ unions set about establishing a minimum wage requirement which effectively priced African Americans out of the market in order to protect their own jobs.

President of the Center for Urban Renewal and Education, Star Parker

Carrie Lukas

Workers unions once had an important role in creating needed protections for employees. Large employers that needed lots of largely unskilled labor didn't have a big incentive to create safe work conditions or pay decent wages to any particular employee. When those employees joined together in a union, they were better positioned to negotiate.

Now, however, most of these unions have outlived their usefulness and are often counterproductive for workers, forcing companies to pay exorbitant benefits and creating high labor costs makes the company less competitive—and ultimately can drive them out of business. We've seen this play out in the auto industry. It's hardly good news for workers to have their employers have to shut down.

And today most union workers don't work for businesses, they work for the government. And it's easy to see how the dynamic with government - worker unions are entirely different. They aren't negotiating with a counterpart focused on the bottom-line. They negotiate with politicians -- and often politicians that they help elect. In fact, unions pour millions into electing politicians who in turn give unions (particularly union bosses) sweetheart deals at taxpayer expense. This is terrible for taxpayers and the economy.

Independent Women's Forum director and Goldwater Institute senior fellow, Carrie Lukas

Mike Connolly

Workers should be free to collectively bargain with employers. And employers should be free to bargain with them or not. Negotiated labor contracts make more sense in some industries than others, and the decision to enter into one should be left to the individual businesses and their employees. The government should not put its thumb on either side of that scale.

Communications Director, Club For Growth, Mike Connolly

Tim Robinson

In spite of his support for free markets, John Stuart Mill, the father of modern liberalism, argued that the excessive bargaining power of employers in relation to individual employees meant that the formation of unions to redress the imbalance should be facilitated by the state; and so it has come to pass. If the balance of power between employer and unionized employee is just right then clearly unions play an indispensible role. If, however, the balance favours one side or the other – and this may differ from industry to industry and from employer to employer – then the imbalance should be redressed. Beyond bargaining around wages, unions have been responsible for enormous changes in hours of work, work practices and worker entitlements over the years. If the recent trend of declining union membership on the part of workers is anything to go by, it appears that unions have been so successful in pursuing their aims that, at least for now, their major work has been done.

Professor & Head of QUT's School of Economics and Finance, Tim Robinson

Grover Norquist

Voluntary unions are like any voluntary organization and do no damage. Mandatory unions where workers are forced by law or threats of violence to pay union dues to union bosses create a monopoly power that extorts money from workers without their permission. And damages both workers and the general economy.

President of Americans For Tax Reform, Grover Norquist

Tad DeHaven

In the private sector, an increasingly small one. The issue of unions is really important in the public sector because I think private sector unionism is at an all-time low in the United States, but public sector unionism continues to rise. It artificially increases the cost of labor for governments which means tax payers. For example, a Stanford University found that California's unfunded pension liability is about $500 million (about 6 times their annual budget). They're already inherently parasitic in that a government employee can't exist without the tax payer who is the host. That's not a value judgment in saying that they don't produce anything of value, there's simply a cost associated with a government employee that's different than their private sector counterpart.

Writer and Cato Institute Budget Analyst, Tad DeHaven

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

Pete Sepp

2011 saw a focus on public sector unions. These unions have secured defined benefit pensions, and top-of-the-line health care benefits that are completely out of whack with private sector benefits, and what taxpayers can afford. Furthermore, the debt and future liabilities that states have accumulated due to these deals is making the economic outlook bleak for many states. Clearly the benefits that have been negotiated are unsustainable, and we saw this in Wisconsin in 2011 where a battle was waged over sensible reductions to public sector union pensions.

Vice President of the National Taxpayers Union, Pete Sepp

William Niskanen

Private unions don't play much of a role anymore. The percentage of the private labor force that is unionized has dropped precipitously since 1950, but the dominant effect of the unions right now is in the public sector and that has led to an appreciable increase in the relative compensation of public employees vs. private employees and increases the amount of expenses for government. There are still some powerful unions in the private sector but in many cases those powerful unions have driven their companies almost out of business. I used to be the chief economist for Ford Motor Company and I saw it almost destroy the American automobile industry, but their influence has been weakened by deregulating some of the older firms in transportation and other industries and utilities back in the 1970s which disciplined them. In the private sector, unions ended up killing themselves and in the public sector they have increased expenses for government and consequently taxes.

Cato Institute Chairman Emeritus and Senior Economist, William Niskanen

Timothy Johnson

Workers unions can be a stranglehold on the economy where the only way you can hire labor is if you pay these astronomical figures which, to some extent, influences businesses to move overseas or to move to different parts of the country where unions don't have such an influence. I think the union movement was designed to protect the workers from mistreatment but there were a lot of people who played on the system. Having to play with the union, and you can see it with the teachers union, it's clear that we don't necessarily get quality because we pay top-notch money, so employees need to be responsible and not assume that they're protected by the union so that they can be slack workers, because then what you've done is strangle-held the business owner who has no recourse. So unions can be the death of an economy if misused.

Entrepreneur and Chairman of The Frederick Douglass Foundation, Timothy Johnson

Ira Stoll

Unions can play a constructive role in negotiating wages for workers against management and in representing employees as stakeholders in a company. They also can help fight for freedom overseas – the AFL-CIO helped win the Cold War by supporting Solidarity in Poland.

Editor of and author of "Samuel Adams: A Life", Ira Stoll

David Ranson

They often influence government to impose regulations that distort and block the efficient use of capital.

President of H. C. Wainwright and Company, Economics, David Ranson

Jonathan Alter

Ideally, unions should lead to increased wages and benefits, thereby expanding the middle class. The erosion of union power has been a net negative for the country. Where unions don't work well is in the professions, or what should be professions, like teaching, where they often impede accountability, protect the incompetent and reduce quality with work rules.

Author, commentator and lead Bloomberg View columnist, Jonathan Alter

Steve Deace

Human history has shown that whenever power is concentrated in the hands of a few, or just one, corruption is bound to take place regardless of the belief system of the one in whose hand the power is concentrated. That's
why historically unions played a vital role as a check and balance on unfettered corporate power. Obviously unions have also struggled with the same fallen nature manifested as corruption that corporatists have.

Nowadays, unfortunately, unions do not primarily serve the needs of their workers but are more or less a funding stream and campaign platform for the Democrat Party. So while unions have a seat at the table, the workers
are worse off.

Talk radio host and author, Steve Deace

Rabbi Aryeh Spero

They place their interests above the company's ability to remain productive and survive, often have an antagonistic view toward the very company that provides them a living, care about their union jobs but not the jobs of those who are not unionized, see victory in expanding arbitrary work rules, and are an arm of the Democrat machine. Their time has come and gone. Companies today will pay for good, honest, reliable workers and those with creative ideas and energy.

Countries where unions dominate end up impoverished or stagnant: Greece, England, Italy, France. They ignore what is fair or what is good for the country; rather see themselves, especially the leadership, as the ultimate end in itself. No money is left for a company to invest, nor can a company plan ahead since unions act arbitrarily.

Government employees demand benefits and salaries so high that taxpayers who pay for this things end up with far less than the employees they are paying. Property taxes, which pay for these goodies, are so high that some homeowners are loosing their homes-- homes they've lived in for thirty years.But the fear of curtailment of vital services is the weapon unions use.

No doubt, one of the reasons for the decline in American manufacturing, and the shipping of jobs abroad, is due to the exorbitant demands of unions and their constant threats of shut-down. It's a relic and has become a tool of the Left -- all in the name of, of course, 'The People'.

Columnist and commentator, Rabbi Aryeh Spero