Tuesday, January 13, 2009

The High Price of Union Demands

WORKPLACE Relations Minister Julia Gillard is whistling in the dark when she calls on militant unions to exercise wage restraint in the interest of protecting jobs in the global economic crisis. History shows that even when Labor has been in power such pleas to put jobs before pay rises have more often than not fallen on deaf ears. The demands by the Construction, Forestry, Mining and Energy Union for pay increases of between 25 and 33per cent for boiler and turbine operators in Western Australia, which prompted Gillard's call, bear a striking resemblance to action by militant unions in the mid-1970s under the Whitlam government that persisted with pay demands of the same order despite repeated warnings they would seriously damage the economy ... >> more Malcolm Colless

This article served as a catalyst for more general thinking on the subject of unions. In times of economic hardship, the last thing we need is more calls for wage rises and better conditions…. I see unions much the way an economist does; as an organized cartel of sorts. One that works to raise wages and conditions above competitive levels thereby, restricting the supply of labor. They often do win higher wages and better conditions but at the expense of further employment. Think in terms of demand, if unions raise the price of labor employers will purchase less of that labor. Here several other troublesome factors come into play. Firstly, higher wages and better conditions reduce the number of jobs available in unionized industries and secondly, they represent a significant anti-competitive force within the labor market hence, gains coming at the expense of the non-unionized, the taxpayer, the owners of capital and corporations and finally the consumer, the latter of course means everyone. Lastly, and this occurs mostly within unionized organizations, unions are a major promoter of sheer mediocrity and are a counter to productivity …

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