Unions
If the above position holds, then unions have a negative effect on the economy. This is based on the fact that a good economy should provide good employment opportunities to the vast majority of its population. If union states fail to meet this threshold, then unions do not augur well with the economic aspirations of any economy. On the same front, it is held that though taxes present a good platform for states to raise funds, it does not make sense to pay more and tax highly. If one is paid highly and taxed highly, the net effect reflects no valuable gain on the part of the employees. What this brings out is a high pay package on paper as a good percentage of the money is deducted through taxation (Thomas et al., 2007).
Labor unions stand accused because of the perceived effects they have on an economy. The unions are perceived to contribute towards unemployment (Thomas et al., 2007). This is because unions engage in activities aimed at raising wages. Labor unions through the use of either procedural or underhand methods force employers to take decisions that could otherwise not have been taken. Such engagement denies market forces a chance to regulate the labor market. This leads to a skewed scenario where the wages are pushed beyond the equilibrium position.
Industries and employers in general find it untenable to offer employment to large numbers of people. It should be noted that employers get involved in business for the sole purpose of making profits. If wages are pushed beyond the equilibrium, then operational costs in business skyrocket or in the least rise above the normal level. To continue making profits, business and all other employers affected by trade union activism seek to cut costs (Thomas et al., 2007). The surest way to achieve their mission is by lowering the number of employees they recruit. In this way, the employers cut employment opportunities so that the effect of high wages is reduced.
The labor unions are quite controversial in nature (Thomas et al., 2007). It is a fact that unions only pursue interests of their members. It is not surprising to find trade unions remaining disinterested from issues affecting the general populace. It is in this line that it has been established that unions do not bother to improve the welfare of others for example, the unions remain guilty for failing to protect the interests of the unemployed. This is the other reason that explains the rising levels of unemployment in union states.
Unions, by negotiating for higher wages, act as a taxing agent (Thomas et al., 2007). Increased wages imply reduced investment funds for companies and other employers. This form of taxation is harmful to union economies as investment funds are typically lowered. The development of any economy rests on the level of investments such entity is able to make. If investments are lowered, the situation adversely affects the economy. An economy lacking in investments cannot employ people. The extra taxation may also drive companies out of business because of the increased nature of competition. In the end, this extra tax has a net effect of cutting employment opportunities and limiting the expansion of such opportunities.
Production is a function of several factors consequently, raising wages puts a company or employer in a difficult situation (Thomas et al., 2007). This is based on the fact that the employer needs extra cash to cater to the laborers increased wages. This may lead to increased product prices. The higher product prices present an extra taxation aspect as consumers have to pay more.
Examples
On coming to power in 1979, Margaret Thatcher intended to reduce the power of labor unions because of the effect thrust on the economy by the unions. The then prime minister felt that the unions had reduced the competitiveness of the UK economy (Thomas et al., 2007).
If General Motors, Chrysler and Ford chose to raise their prices of cars as a result of union pressure to increase wages, the net effect will be reduced sales. This will necessitate the releasing of workers as fewer sales cannot sustain the companies. This adversely affects the economy
Examining the non-union states
In non-union members, market forces play a crucial role in determining wages (Thomas et al., 2007). In these states, wages are set in a manner that reflects the current state of the economy. This augurs well for the economy as employers have the freedom to adjust wages depending on the economic conditions. In the same light, employers are able to operate within the confines of their budget. This however should not be misconstrued that in a union free state the operation of economic activities is free from shortcomings. The strong point of such an economy remains in the presence of an investment enabling environment (Thomas et al., 2007).
Unionization is thought to hold a derailing effect on economies during times of recession (Thomas et al., 2007). During recession, funds are hard to come by consequently, setting high wages in an environment characterized by financial hardships may serve to block any recovery mission by employers. If economic recovery fails, unemployment soars and a cyclical pattern is established.
Unions Reduce Investment
It is discernable that unions tax corporations earnings. Earnings play an important role in determining the extent to which a business can reinvest. An increase in earnings as a result of an upward adjustment on wages typically affects a firm s redistribution strategy on proceeds. Company returns are minimized and thus makes undertaking new investments a costly venture (Thomas et al., 2007). In a nut shell, such a company cannot reinvest as it lacks funds. Conversely, in non-union states, companies are not pushed to alter their wages arbitrarily. This allows companies ample time to organize and draw development strategies. This is the case as the business entities in such environment are in a good position of paying workers while at the same time retaining a good amount of the returns for reinvestment. It is primarily on this premise that non-union states remain in pole position to grow and develop economically when compared to union states.
From above, it is held that a union free-state is able to reap the benefits of reinvestment as funds are readily available. Through reinvestment, economies are able to generate more funds as production is expanded. An expansion in production necessitates the recruitment of a larger work force to take care of increased activities. To address this, employers hire more workers to offer labor. This explains why non-union states enjoy relatively a higher employment rate as compared to union states.
The taxation aspect is developed from the investment argument. The absence of trade unions implies the absence of pressure to increase wages. Such absence allows free determination of wages which in turn facilitates the repatriation of a good percentage of profits back into a business. This means that the business is not heavily taxed through wage payments (Thomas et al., 2007).
It follows that the creation of further employment and increased production will in the end lower prices of goods and services. Lowered prices reflect that the economy is relatively less affected by increased taxation.
Considering the United States manufacturing industry, one gets the notion that unionized jobs are on the decline. At the same time, the non-union employment is on the increase. In the period between 1977 and 2007, unionized jobs in manufacturing shrank by more than 70 percent. During the same period, non-union employment rose by 6 percent (Thomas et al., 2007). This clearly points out how the presence or absence of unions affects an economy and employment in particular.
The construction company in the United States of America has equally captured the effect of the presence or absence of labor unions. In this sector, since 1977, the non-union jobs have expanded by 160 percent. On the converse, the unionized jobs fell by 17 percent during the same period (Thomas et al., 2003).
Conclusion
On the basis of the evidence adduced in this paper, it is revealed beyond relative doubt that unions derail economic growth and development. This is based on the realization that unions promote unemployment tendencies and tax rises. On the other hand, non-union states are found to promote employment and the reduction of taxation. It is held that a non-union state is better placed economically than a union state.