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The freedom to enter into contracts and to direct the use of economic resources one owns are essential to the operation of a market economy. Allowing employees to form unions to bargain collectively over wages and employment conditions is consistent with economic freedom, and any government intervention preventing unionization would be a violation of economic freedom. Nevertheless, American labor law, especially since the 1930s, has 'altered the terms mad conditions under which unions collectively bargain to heavily favor unions over the finns that hire union labor. Labor law has given unions the power to dictate to employees collective bargaining conditions, and has deprived employees of the right to bargain for themselves regarding their conditions of employment. While unions and economic freedom are conceptually compatible, labor law in the United States, and throughout the world, has restricted the freedom of contract between employees and employers. The effect of unions on growth and prosperity can be examined at two levels. Narrowly, one can examine the effects that union contracts have had on unionized firms and industries. More broadly, one can look at the way that unions have affected labor law. Unions have successfully lobbied to increase the power of unions over firms, which in turn has allowed unions to impose more constraining conditions on employers. Union contracts likely would not contain some of the provisions they do were it not for the bargaining power labor law gives unions relative to the employers of union labor. Unions have 'also 'affected labor law by lobbying for conditions under which nonunion labor can be employed. Two notable examples are the minimum wage law and the Davis-Bacon Act, which require the federal government to pay the local prevailing wage rate--that is, the union wage rate--on all contracts.

Politics & Current Events
January 1
Cato Institute
The Gale Group, Inc., a Delaware corporation and an affiliate of Cengage Learning, Inc.

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