Exactly. It's precisely due to the positional imbalance between economical actors that the government should intervene in order to level the power relations among different parts. A capitalistic system without any regulation and redistribution mechanisms quickly degrades into an oligarchy of a few offensively wealthy people.
The fact there there is a surplus of work force with respect to labor demand is actually a strong reason for the government to intervene in labor prices. If the labor market is left unregulated, and with technology quickly replacing lots of work posts, wages will tend to drop overtime because employers hold the higher hand and, as you said yourself, there will be plenty of people accepting poorer and poorer work conditions in order to just survive.
I think it's a shame that many unions have become left wing political organisations, they should be using collective bargaining to protect workers but that seems to have become lost in attempts to have excessive political power.