Comment on each of the following statements: a. \"unions tie the hands of manage
ID: 1243776 • Letter: C
Question
Comment on each of the following statements: a. "unions tie the hands of management and inhibit efficient decision making." b. "Unions contribute to economic efficiency in that union wage pressure hastens the weeding out of the high cost, least efficient producers in each industry" c. "Although unions may reduce wage inequality, to the extent that they reduce wage differentials based on individual merit and effort, the outcome may be rightly perceived as both inequitable and inefficient." d. "unions impair the efficiency of our economy indirectly by diminishing profits and thereby reducing investment and economic expansion."Explanation / Answer
(a) It is true that unions tie the hands of the management and lead to inefficient decision making. As labour unions go on a strike for more wages, lesser working hours or other demands, this alters the management decisions, which might aim to work otherwise.
(b) unions can contribute to higher efficiency when they put pressure on wages, that mihgt increase the costs of production (as variable costs on labour increase) and least efficient producerd might quit the industry, when they are not able to cover even the variable costs in the short run.
(c) When unions reduce wage inequality, they do not consider the individual's or worker's particular talent and skills and expertise into consideration, and those who are more talented get the same wages as those who are less talents, and this might result in an outcome that is inequitable ultimately and these workers might not put in their best efforts.
(d) It might not be true that unions impair the efficiency of the economy by rising costs, diminishing profits and there by reduce investmetn and economic expansion. It might be the other way round. Union that increases the wages of the workers- these workers spend more on consumption which increases demand in the economy for more goods and services, which will increase economic investment and expansion.