Opposition to trade unions

Opposition to trade unions comes from a variety of groups in society and there are many different types of argument on which this opposition is based.

The economist Milton Friedman, Nobel Prize winner and advocate of laissez-faire capitalism, believed that unionization frequently produces higher wages at the expense of fewer jobs, and that, if some industries are unionized while others are not, wages will decline in non-unionized industries.

By raising the price of labor, the wage rate, above the equilibrium price, unemployment rises. This is because it is no longer worthwhile for businesses to employ those laborers whose work is worth less than the minimum wage rate set by the unions.

Trade unions often benefit insider workers, those having a secure job and high productivity, at the cost of outsider workers, consumers of the goods or services produced, and the shareholders of the unionized business. The ones who are likely to lose the most from a trade union are those who are unemployed or at the risk of unemployment or who are not able to get the job that they want in a particular field.

Advocates of unions claim that the higher wages that unions demand can be paid for through company profits. However, as Milton Friedman pointed out, profits are only very rarely high enough. 80% of national income is wages, and only about 6% is profits after tax, providing very little room for higher wages, even if profits could be totally used up. Moreover, profits are invested leading to an increase in capital: which raises the value of labor, increasing wages. If profits were totally removed, this source of wage increase would be removed.

According to The New York Times, wages in 2012 fell to a record low of 43.5 percent.

Friedrich Hayek argued that the effect of union activities to influence pricing is potentially very harmful, making the market system ineffective.

By causing wage increases above the market rate, unions increase the cost to businesses, causing them to raise their prices, leading to a general increase in the price level.Austrian economists such as Robert P. Murphy, however, dispute this, arguing that the increase in the cost of labor simply means that less of other goods can be bought. He writes:

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