National Debt Clock

Saturday, May 23, 2009

The Negative Effect of Unionization

So while unionization may benefit the union workers in the short term, the net effect is a less profitable company. What's wrong with that if the workers are being paid more? Well, if the company is less profitable, they will be less attractive to investors and have a more difficult time raising capital. This means less growth. Further, the less profitable a company, the less it wants to spend. There is now downward pressure on costs, including wages. There is also less expenditures on future innovations, thus making the company potentially less competitive in the future. This all adds up to a company that is less likely to hold its own against its competitors. This could potentially result in the closing of the company and the laying off of the workers. While this is obviously a worse case scenario, workers should see that unionization is not the way to go. What isn't good for business is not good for the worker.

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