What is the Impact of collective bargaining on the labour market?

Question

What is the Impact of collective bargaining on the labour market?

Answer 1

The history of Unions & the Labour Movement is well documented .. start with wikipedia and more onto more specialist sites (eg TUC).

The general effect is to improve (typically the lower paid) workers wages and conditions 'above' the 'going rate'.... this has a 'boostrap' effect on the rest of the economy.

It starts by distorting the Labour Market for specific 'types' of worker .. those with effective / aggressive Unions become relatively 'more expensive' .. and Companies naturally respond by trying to minimise the number of 'expensive' workers they employ ..

In the short term this can decrease profits (as Companies invest in mechanisation and shed jobs), in the medium term it leads to higher prices (as all Companies have to recoup their investment) and in the long term it leads to higher imports (as Companies go bust or close down their operations in high cost countries and they or others import goods from lower cost countries) ... the overall effect to to raise the living standards of everyone.

In a closed economy (eg. Soviet Union, UK Civil Service) investment/profits, prices and imports can be controlled ... however in an open economy (eg. UK) investors move their money away from high cost / low profit business.... ultimately this eliminates the high cost jobs from the economy (and thus leads to the demise of the Unions)

The overall effect is often beneficial for both the 'high wage cost' economy and the 'low wage cost economy' ... as work is migrated oversea's so does the 'power of the Union' .. the living standards of the 'low wage economy' workers will eventually 'catch up' with that of the high wage economy .. to the mutual benefit of both ..