Question

Does union increase or decrease efficiency? Does union increase or decrease wage inequality? Discuss.

Answer 1

Labor Unions are legally recognized, organized associations / bodies working for the rights and demands of workers, employees or labors. They rely on collective bargaining and help the workers get the best of wages and working conditions,

There are both pros and cons of Unions:

They increase efficiency due to :

1) increased wages and better work conditions due to their collective bargaining power

2) reduced employee turnover

3) they also receive additional benefits like health care, retirement benefits , holidays, insurances etc

But on the flip side:

This efficiency may decrease due to:

1) belonging to Unions makes them behave in unruly manners detrimental to the work culture and brings down efficiency

2) The collective bargaining power is used as a double edged weapon where they can threaten to go on strike or under-perform

3) Unions may not always have highly skilled members and thus those who do not have the requisite skills will not be efficient

As regards wage inequality on the positive side we can see that when we compare the wages of union workers with non - union workers we find that since unions are in a better bargaining position they demand better working conditions, wages and other benefits while the non members do not get the same. This brings about an inequality in wages.

but if the non members are better qualified than the union members they still command better wages and many other benefits which the union members do not command.