Job Security


A big concern for unions is job security, and with good reason: they create the need for workforce reduction. The union's success in raising wages results in increased costs, requiring price increases. Higher prices result in lower demand, which necessitates cuts in production. Reduced production requires fewer workers.

When there is no union, the employer is paying the market wage - no more than necessary to keep a full workforce. Competition and changes in customer preferences might reduce demand for his product, just as they might for the unionized employer, but he will not be forced to jack up prices to cover the cost of an inflated union wage. The need for production cuts is less likely.

Even if layoffs are necessary at a non-union employer, the newly-unemployed workers have a better chance of quickly finding another job. That is always the case when workers are paid at the market rate, because it means there is a market for their skills at that rate; there is demand for their services. 

Real job security is the knowledge that if you lose your current job, you can easily get another just as good.

Businesses don't hire people out of a sense of social responsibility; they hire them because they need them. They can't make money without them, and they are not going to let them go just to be perverse. When they do let them go, it is because they no longer need them, for whatever reason. At that point, workers need to find another job - an employer who does need them.

Union efforts to secure jobs are counter-productive, because every unneeded worker on the payroll increases costs for the employer. Increased costs require price increases, which further reduce demand, which means even fewer workers are needed.

One UAW program to keep workers on payroll was the Jobs Bank, which was described in an October 17, 2005, article in the Detroit News. The program, discontinued in 2009, kept laid off workers on the payroll and put them to work doing community service jobs. Or doing crossword puzzles. Or doing nothing. The article said GM agreed to contribute up to $2.1 billion over the four years of the 2003 contract. In the 2007 agreement, the cap was $2.211 billion.

There is a government-operated safety net for laid off workers: unemployment compensation. It is not full pay like the UAW's Jobs Bank, but it does provide a few months of financial support to get workers by until they find something else.

In a free enterprise system, it makes no sense for an employer to guarantee jobs. In a truly competitive market, employers canít even guarantee their own continued existence. The weaker competitors fail and are replaced by new entries into the market. Political and technological changes wipe out entire industries, like typewriter manufacturers and telemarketers. 

Businesses cannot be expected to last forever and should not be making long-term promises to employees. In fact, holding on to employees when the company is operating at a loss only hastens the failure of the business. By trying to avoid laying off 50 workers, management could destroy the company and cause hundreds to lose their jobs. Businesses are not welfare agencies. They should not employ people unless it is helping the bottom line.


Unions are Killing Michigan
The Wagner Act
What Economists Think
Why the Market Wage is Better
The Illogic of Collective Bargaining
Market Wage vs. Fair Wage
Imagining a Free Labor Market
Rights and Freedom
Destruction of the Middle Class
Employee Free Choice Act (EFCA)
Job Security
Collective Bargaining and Unemployment
Social Costs of Collective Bargaining
Ending Fringe Benefits
Democrats and Unions
Collective Bargaining in Government