Friday

 

What If All of Us Were Union Members?

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Most economists agree the demand for labor is elastic, meaning
an almost horizontal labor demand curve for labor.
Demand for labor is sensitive to wage level, e.g. if wage level goes up 10% the number workers demanded goes down more than 10%.
Per Figure 1 model, with full unionization of an industry with resulting wage level of B employment in the industry would substantially decrease, from D to C.
The former union workers and potential ones find work in non-union industries where employers pay lower market value wages.
For the unionized workers who keep their jobs wages would go up to B.
Total employment and total wages paid in the industry would both decrease because of elastic demand for labor.
The industry's total wages paid before unionization is the larger area 0-A-E-D.
The economy's total wages paid after unionization is the smaller area 0-B-F-C.
Area 0BFC is about 44% the size of area 0AED
The price level in the overall economy would go up, e.g. to somewhere between 1.0 and 1.1.
The unionized workers come out ahead, their wages have increased more than the price level increase.
Non-unionized workers who earn the equilibrium wage Acome out behind, there has been no increase in their wages to more than cover the price level increase.
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So, it’s better from the viewpoint of unionists that not all of us become union members.
If we all were union members wages for everyone would be B.
Assuming we’d all be employed the overall price level of products we buy would be somewhere over 1.1.
The difference is due mainly to economic inefficiencies, from ChatGPT:
“Inefficient Wage Structures: Unions typically negotiate for standardized wage rates, often based on seniority rather than individual productivity. This can lead to wage compression, where high-performing workers are paid similarly to less productive workers. This mismatch between pay and productivity can reduce incentives for workers to excel, leading to lower overall productivity.”
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The less unionization in an economy:
· the more profits and wealth are created
· the more businesses expand and new businesses start
· the faster the economy, employment, and wages grow
· the lower price inflation is
In general, unionization reduces GDP size and growth rate and increases price levels and inflation.
Ideally, for the general and future good, none of us would be union members.
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A helpful five-minute video: “Do Unions Raise Wages?”
https://www.youtube.com/watch?v=S3EUrI63SnA
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