Do labor unions increase the wages of workers - Essay Example

It is due to this rift that Unions have to come in and provide with a compromising solution to such issue. The activities of Labor unions vary in accordance with the needs of the workers and the activity whereby the Labor Unions negotiate terms and conditions with the employers on matters regarding wage and working condition is referred to as Collective bargaining (Taylor et al, 2010). Labor Unions gained massive popularity during the initial 19th century but after mid 19th century, Labor Unions started losing their grip and popularity and it was in 1980 that union membership fell down drastically within Europe (Wilenius, 2004).

The fall in Union membership did not put an end to the Union’s ability to influence wages for employees. There are many ways in which Unions may be able to influence the pay rate of employees working in an organization. The most common ways include: The unions may halt production by advising employees to go on a strike, strike or lock-downs may cause severe problems for organizations that would be running on strict production-runs. Unions may increase the demand for labor services by providing reduced workers from the union.

Unions may force governments to disallow foreign import of skilled or unskilled employees. Unions may restrict supply of competitive inputs. If a Labor Union would not restrict the supply of labor and workforce, the market position would be at an equilibrium position i.e. the supply and the demand would be in a balanced position but if the Labor Union restricts the supply of labor, there would be excessive demand that would have to be met because of the low level of employment. This reduction in the labor would cause the wage rates to rise.

All of this would happen because of the supply restrictions. This can be showed graphically as follows: This wage increase is also achieved by Labor Unions by using other techniques such as collective bargaining. Labor Unions use threatening techniques such as strikes and lock-downs in order to achieve wage increases. This can be further represented graphically as follows: In both the scenarios, the end result of achieving a rise in the wage rate is achieved by the Labor Unions but the ways of achieving the wage rate is relatively different from each other.

Labor Unions tend to be more powerful when there is no substitute for human work force but where the option of machinery and automated techniques exist; Labor Unions become ineffective in forcing a wage increase of higher employment rate for their workers. With the inception of more advanced technology and increased use of automated techniques during the course of production, Labor Unions effect has been reduced heavily as machinery has worked as a strong substitute for human in the production-runs.

Although automated techniques have reduced the impact of the Unions, research has shown that union members are able to get better wages than non union members. This is primarily because of the extra force and pressure applied by the Unions on behalf of all their member workers. A research conducted by the AFL-CIO (America’s Union Movement) clearly suggested that collective bargaining raises wages for union members rather than the non-union ones. Source: AFL-CIO (America’s Union Movement), 2011 Labor Unions are usually called upon as monopolistic, this is because of their forceful nature of dictating terms upon employers by prescribing a wage rate but this monopolistic nature cannot be