Are Unions Good or Bad for the Economy?
Last week I went to Melbourne for a 3-day business trip. I consider myself lucky as the day after I flew, Qantas Engineers had a strike causing massive delays of all Qantas flights and stranding thousands of passengers all around Australia. I will be flying again next week to Sydney and there’s a rumour that another strike will strike again. Fingers crossed that this won’t happen as I don’t want to be delayed and also there are a lot of people travelling to Sydney for the World Youth Day who will be affected.
In general, strikes are costly to both the companies and workers as they represent lost of income to both parties. The longer the strike, the more costly to both parties. This occurs because negotiations do not always run so smoothly. There is also an element of misunderstanding between the interest of both parties. Unions might believe that the company does not appreciate their effort and value to the firm. Management might believe that unions do not appreciate the willingness of the owners to earn high profits.
There’s a debate between economists whether unions are good or bad for the economy as a whole. Unions are a solution to the market power of the firms that hire workers. In the absence of unions, companies use its market power to pay lower wages and offer worse working conditions. In this case, a union balances the firm’s market power and protection to workers from being at the mercy of the owners.
On the other hand, if the wages demanded by unions rise above the competitive market level, companies would limit hiring workers causing some workers to be unemployed. This also results to decrease in wages in the rest of the economy and decrease in the business activities resulting to lower output. In some companies, successful unions benefits only union members at the expense of non-union members and other employees in other companies.
In the end, is there really a consensus whether unions are good or bad for the economy? I just don’t care as long as my flight next week will fly as high as this Qantas 747-476 plane on time!
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Tags: Airline, Qantas, Strike, Unions
We can’t afford for our flight to be delayed next week!
The plane in the picture is not a Qantas 747-476. It’s a 737-476!
What an interesting and timely post.
With the new Government in Australia, and abolishon of Australian Workplace Agreement, things are certainly swing back in favour of Unions.
I don’t see unions as necessarily a bad thing, certainly they can be an effective control on the dominance of firms over employees.
The biggest problem I see is that when it comes to collective bargaining, Unions negotiate an equal deal for all workers that they represent. This is not fair to the workers who are above average and deserve to be paid more, and it is unfair to the poorer workers who are getting paid more than they are worth.
This provides a disincentive for the more able workers and the overall average standard of work performed will fall, hurting the economy.
This is essentially also the problem with communism, in that, by not providing a reward to work harder or more efficiently, this sort of activity is effectively discouraged and the economy, and thus the country’s population, suffer.
Unions should operate purely as an advocacy group, looking after members who can’t look after themselves, and should not take negotiating right away from it’s more able members.
Everyone should get paid what is fair in relation to the quality of work they perform.
Agree?
ei Mister Wilson, are you attending the world youth day in Sydney?
Can you extend my regards to the Holy Pope?
Take pictures of him and make blogs too!!
Yes Rod I agree that everyone should be paid corresponding to their level of skills and the quality of job they perform. Doctors for instance are paid higher than street sweepers because their profession takes a long time to study and practice. But sometimes this is not always the case.
The pay is also dictated by the supply and demand of workers in the marketplace. At the moment, the mining boom in Western Australia demands more trades workers such as welders, machine operators, electrician and even non-skilled laborers such as cleaners in the mine site.
These people are paid so much higher compared to professional workers because of shortage.
Btw everyone, the pictures are courtesy of Sir Nigel..
Sorry if I called the plane wrongly. It looks big that’s why I thought it’s 747!
Hi Myrns - yes I will be in Sydney during the world youth day. I will say hi to the Pope when I get chance and ask him to call you on your mobile. Ok?
In my former client, the non-members of the union actually earn higher than that of the members. Of course, payroll is confidential so they wouldn’t know.