Strike Rare
Why do we have trade and labor unions today?
Economically speaking, a unionized industry will never achieve equilibrium in the labor market. This is due to the fact that unions impose what is essentially a transaction cost for wage payers: a fraction of every wage paid to a member of a union goes to the union itself, a 3rd party organization that has no direct involvement with the job.
With this transaction cost, either the employer has to pay more so that, after the union fee, the employee actually gets, in his hand, the competitive wage, or (as is more likely today), the employer pays the competitive wage and the union employee takes a pay cut.
In some scenarios, such as monopsonies, the social loss from labor unions can be less than the current social loss (threating to strike if wages aren’t brought close to competitive wages), but still the union doesn’t fix the market, it simply lessens the problem. Even still, these monopsonistic scenarios are rare today, so my question remains, why do we have unions?
People just like to join groups, most cannot make good decisions on their own so they join a group to fit in and follow.
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