Economics Week 14 Labor Unions

Prompt: “Do Labor Unions Cause Price Inflation?”

Labor unions create benefits for their members. These can include reduced hours and higher pay. The labor union enforces that its members are protected from being fired, and that their demands are met. But this stops the free market from deciding how many workers it needs, and how much they’ll be paid. In a free market if a business is close to bankruptcy it can let go of some of its employees, but if they are in a labor union it’s not able to. So the business has to continue paying employees it can’t afford, and therefor has to raise its products prices. This creates inflation, as the business has to continue raising prices in order to pay the employees protected by the labor union.

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