Economics Class

Labor Unions And Price Inflation

Labor Unions in the US are composed of workers who demand higher wages, less working hours, and better working conditions. The workers who are part of labor unions go on strike in order to get what they want. In a free market economy businesses would not be prey to their demands. The business could either agree to some of their requests or it could fire the workers, if it had to. However, because the government gets involved, what has happened is that the government has forced businesses to comply to the labor unions’ demands. When a business is coerced to give the workers what they want, it incurs more costs. Since the business’s cost will go up, it will either have to get more money, or go bankrupt.

Assuming the business does stay open and its costs have gone up, it will usually raise its prices. Because the business needs to cover the costs that the labor unions imposed on it, it will have to charge a higher price for its goods than the fair market value demands. Since many businesses are subjected to this government intervention, the overall effect will be price inflation. Price inflation affects all of us in our daily life and it also distorts the true value of an item. Labor unions are supposed to help the workers, but in causing price inflations they actually hurt the workers by making them pay more for the goods. Another point, that I mentioned before, is that some businesses will go under since they will not be able to comply with the demands of the unions. Where will the workers be then when they have no job at all?

There are many other problems that labor unions cause, but price inflation is certainly a serious one. Once again, government intervention in this case through unions, does not help the people, it hurts them.

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