Earlier today I came across an article written by economist Walter Block concerning unionization, wage rates and left-wing rhetoric. He offers a very concise explanation of how wage rates, just like prices, are determined by market forces of supply and demand, and how efforts to artificially raise or lower these rates can only result in harmful market distortions and unemployment. Here is the section dealing with the economics of the matter:

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According to our friends on the left, the reason we need unions is because without them, employers would grind employees into the ground. Were organized labor to disappear, wages would plummet; workers would have to work on Sundays ("If you don’t come in Sunday, don’t bother coming in Monday"), tip their hat to their bosses, and suffer all sorts of other indignities, including losing virtually all improvements in working conditions made over the last century.

Of course, this is all wrong. Wages and working conditions are not set by firms. Rather, they depend upon the productivity of labor, more technically on the marginal revenue product of the worker. This can be defined as the extra amount of revenue brought in by adding one more person to the payroll. For example, if there were 1000 workers creating an item that sold for $x, and then the 1001^st employee came on board and the firms sales rose to $x + $7, then the marginal revenue productivity of the last person hired would be $7 per hour.

Wages cannot long be higher than this amount, or the company will lose money on every worker it hires. For example, if compensation is $10, and revenue taken in due to the efforts of the worker is $7, then the firm loses $3 every hour the man is on the shop floor.

On the other hand, a situation cannot endure where wages are lower than this amount. For example, suppose pay was $2 per hour, while productivity remained at the $7 level we are considering. Then, the employer would earn a pure profit of $5 every hour. This cannot last for two reasons. First, other companies would have incentive to hire such a worker away from his employer. Assuming that the productivity of the latter would be the same $7 on the premises of any member of the industry, a competitor could offer, say, $2.25. This would be a substantial increase over and above the present salary of $2, and yet would allow the newcomer to earn a profit of $7–$2.25 = $4.75. But if this would work, so would a bid of $2.50, $2.75, $3.00, etc. Where would this process end? As near to $7 as allowed by the costs of finding such "underpaid" workers and convincing them to switch jobs for higher pay. Second, workers talk to each other. An employee worth $7 but paid less than that would be tempted to quit if he found out that his associates at other stores or factories were earning more. Thus, wages for workers of this skill level will tend to earn $7. This does not mean that under free enterprise there will be no deviations from this amount. There will be. The market is continually changing. But there is an inexorable tendency for wages to continually move in the direction of this equilibration.
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Thus it is clear that, for the same reasons that prices for similar goods are close to the same equilibrium point, wages naturally approach a point where it makes sense for employers to give people jobs. If the employer is forced to raise these wages above the natural point (by minimum wage laws, coercive union actions, etc), he will raise the prices of his goods or let workers go in order to offset his losses. If he does not do one of these things, he will go out of business and all his employees will be unemployed. If he raises prices, these costs are passed on to the people who buy his products, that is, other workers. In the end, this can only result in price inflation, and the average worker is not any better off. Simply put, price controls and minimum wage laws do not work, and only hurt the workers they claim to help.

*Note that this only concerns unions who coercively prohibit new workers from replacing those who are on strike. These workers, who union members derisively call "scabs", are in fact nothing but workers who are even worse off than the striking workers. These unions champion the worker well enough off to go without wages for weeks or months during a strike, while showing contempt for (or committing acts of violence against) those previously without jobs who want nothing but to make money for their familes. This is nothing but hypocrisy, and in facts only prohibits hard-working, honest men and women from feeding their families.