Criterion 10: Wages, Unions, and Unemployment

Wages are prices, and are subject to the same forces that affect all prices. An economics textbook should explain that supply and demand determine equilibrium prices for labor just as they do for the price of apples. Trying to repeal the laws of economics in labor markets doesn’t work any better than trying to do so anywhere else. This is why increases in the minimum wage always cause unemployment among the least skilled workers—precisely those whom the increase is supposed to help.

Economics texts also should point out that in a competitive market, wages cannot long outpace the equilibrium price of worker productivity without causing serious economic disruptions. Laws that favor labor unions by permitting compulsory unionism and mandatory collective bargaining allow union employees’ wages to be higher than they would be if public policy were neutral toward unions. (See Michigan Labor Law: What Every Citizen Should Know.) A good text will discuss when and how this becomes possible, and the effects it has on other workers, consumers and investors, both in the short and long-term. The effect of uneconomical union activity on efficiency and investment also should be considered.

A good text also will describe various types of unemployment and explain why some unemployment is inevitable in a market economy. Government policies toward unemployment such as "unemployment insurance" and government job-training programs, should be discussed, with results as well as intentions in mind.