The proportion of British workers in a trade union was 22.4% in 2023. The proportion of American workers in a labor union was 11.2% in 2023. While the number of American workers in a union were considerably lower than British workers in the union, these numbers are still high enough to affect the economy. People tend to think that unions have a good effect on the economy. But if collusion between companies to fix prices harms the economy, why would collusion between workers to raise wages have any kind of positive effect?

Artificially raising the wage of workers higher than they would be in a free market causes a decrease in demand for that labour, while simultaneously causing an increase in supply. This will lead to more unemployment, as was discussed in my article on minimum wage laws. Many people argue that unions are necessary to prevent employees from having incredibly low wages and being ‘exploited’ by their employers. As discussed in my article on minimum wage laws, competition between businesses will drive up wages of employees to an adequate level anyway, so most employees will earn a liveable income. But what about the employees who don’t earn a liveable income if the market were completely free? With worker unions artificially increasing wages, these individuals will be likely to be unemployed instead as the reason they earn so little is because, ultimately, they provide little. There may be rare scenarios when an individual is not being paid their true market value due to the worker not being aware of the many alternatives where they can earn more. However, this situation is incredibly unlikely.

While there are many similarities, the effect due to unions is slightly different from the effect due to minimum wage laws. This is because minimum wage laws will artificially cause an increase in all wages while worker unions will only cause an increase in wages in some industries at a different proportion to wage increases in other industries. Let’s say that a worker union increases the wages for individuals in the automobile industry. This would cause more people to try to work in the automobile industry, causing fewer people to work in other industries, where they would be more efficient. This is bad for society as a whole as overall production will be less efficient than if wages were left to the free market.

One claim that people make is that worker unions are responsible for the improvements in the working conditions of employees over the years. In the 1800s, employees worked in harsh conditions and had to endure long working hours. Most people praise worker unions for improving these conditions. However, these working conditions most likely would’ve subsided anyway due to competition between companies for employees. Companies would’ve offered better working conditions to attract employees to their business over other businesses.

A big issue with unions is that they make it harder for employers to fire employees. This has led to an abundance of situations where employees have kept their jobs after acting inappropriately or if they are being unproductive. This is obviously bad for the economy as it causes a more productive employee not to get the job. However, besides being bad for the economy, it is also morally wrong because it is a restriction of freedom. The employer owns the business. Therefore, they should be allowed to employ, or not employ, whoever they want, given they abide by the terms that have been outlined in the employment contract that they signed when hiring the employee. Another big issue with making it harder for employers to fire employees is that employers will be far more careful when hiring and they are less likely to give an individual with minimal experience a chance. Unions can also cause many other problems, including disruptions from unnecessary strikes, the requirement for workers to adhere to union decisions even when they disagree, and heightened tensions between employees and employers.

While there are many problems with unions, there are some advantages that I would like to point out. Unions can help if you are being unfairly treated at work. They can also have training and educational programs helping many people gain skills that could help them get better jobs. Unions are also responsible for banning child labour exploitation, which is morally wrong because children do not have the capacity to consent.

Ultimately, though, the disadvantages of unions far outweigh the advantages. Most of the improvements in employee conditions that have been brought about by unions would’ve emerged anyway due to competition between companies. As always, the economy runs better when the free market is allowed to operate without intervention.