Worker benefits affecting US comparative advantage

For many years US workers have been receiving benefits that far exceeds their competitors. Here I want to concentrate mainly on the auto industry, because this is the industry that has received a lot of criticism and international competition in the past and in the coming future. When talking about the auto industry, we are referring to the production, wholesaling, retailing, and maintenance of the motor vehicle.

Labor unions have been in effect for many years in the US auto industry, and although there have been many advantages to these unions such as worker’s compensation and benefits, there has also been many disadvantages in the formation of these unions. Since the disappearance of the auto industry it is more than fair to say that the disadvantages of the labor union outdid the advantages. Workers benefits has negatively affected the US’s comparative advantage in the auto industry, and if not taken more seriously it is more than likely going to affect other industries too; such as the food production industry.

The power of labor unions have allowed to raise wages and benefits to unrealistic levels in the auto industry, and the many strikes made them look very greedy especially in the already high earning jobs they already possessed in the auto industry. According to Enzo Silvestri a frequent contributor to the ehow.com “These levels can be above what the market can sustain, which will cause the manufacturer to raise the costs of items that it produces. The trickle-down effect and the increases in costs are passed on through the distribution chain to the end user, who inevitably is the worker initially represented by the union.” The fact remains when the prices of goods go up consumers will look else where for the same products, and if that means purchasing imports then that will be the case. Labor unions have single handedly increased the prices of motor vehicles produced in the US, and as a result of this many of these companies have moved their plants overseas where they are not obliged to pay workers benefits. These unrealistic wages and benefits will and have encouraged employers to either reduce or completely outsource the work to countries where labor unions aren’t involved in the industry.

If labor unions cooperate with the employers many jobs especially manufacturing jobs will be saved and remained in the US. By doing simple things such as reducing worker benefits like health benefits, dentist benefits and other ridiculous benefits that make no sense whatsoever; would be enough to keep jobs at home. These are simple changes that can make major differences in the quality of life in America’s middle class and lower class families.