How Do Unions Effect Different Wage Rates?


Quick Answer

Unions affect wages in several ways, including increasing the average pay rate for members due to the collective bargaining power within sectors that feature employers with competitive privileges and high profit margins, as well as lowering the wages for nonmembers. The specific effects vary depending on the industry and union as well as its size and the available workforce and earning potential.

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Full Answer

The primary purpose of a union is to protect its members from unfair treatment by employers, specifically negotiating more competitive contracts for wages and better benefits. However, many industries that feature labor unions struggle with a variety of factors that affect the ability of employers to meet these demands while continuing to remain profitable. In the past, a company would accept a union's request for higher wages and pass off the additional cost onto the consumer to make up the difference. However, this is much harder for companies due to the highly competitive nature of the market, which features many different entities attempting to offer lower prices to attract customers.

As such, unions can result in lower wages for nonmember workers as a result of their attempts to earn higher wages for their own members. Some unions also refuse to offer the higher pay rate to new members, creating a type of tenure system that reduces the salary costs for the employer. Unions can also cause businesses to make other cost-cutting measures to accommodate the wage rates, such as hiring fewer employees.

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