Question

If union contracts raise wages above competitive levels, what might be one negative outcome? Industries will raise salaries for top-level workers but not entry-level workers. Companies will move overseas to escape unions and hire cheaper labor. Inexperienced workers will lose their jobs to more experienced workers. Employees will be content with their status and thus less likely to join unions.

Answer 1

The answer is B. Companies will move overseas to escape unions and hire cheaper labor. Just took the test and got it right.

Answer 2

If union contracts raise wages above competitive levels negative outcome will be that products will be more expensive. When talking about economy expenses always have an impact on the product if that happens sales may decrease as a result of it.  Companies and industries always want to be competitive on the market, that means having a good product for a considerable price. This could be considered a commandment on the economic market. That's why we could say that on the response of the tension of the unions to increase wages companies will move overseas to escape them and hire cheaper labor so they can maintain their prices and quality for the same cost.