Saturday, January 29, 2011  The death of Trade unionism  Trade
unions have been a part of the labor market dating back to the
19th century. In this post, I am going to explain why I think
their era might be over.  I will discuss three different
factors, but first, I'd like to start with why trade unions
exist and why they can actually be useful.  In essence, a trade
union is a form of cartel - several "sellers" of labor join
together and push up the price (salaries) above it's natural
level - the level it would have in perfect competition. Perfect
competition, for the uninformed, is a state where every seller
and buyer is too small to affect the price: Prices equal
marginal cost (the cost it takes to produce the last unit sold),
and if a seller raises his/her price just 1 cent, he/she would
lose all her customers. At the same time, no buyer can demand
that prices be lowered; a buyer who wants to pay 1 cent less
than the market price will find that no-one is willing to sell
to that price. No-one has any pricin