14. Labour Markets - Trade Unions in Labour Markets

Question 1

What is a trade union?

Answer 1

An organisation of workers from an industry that bargain for higher wages and better working conditions

Question 2

When are trade unions strongest?

Answer 2

When they have a very high % of people from an industry in them - effectively then become a monopoly supplier of labour - and controls labour supply at given wage rates

Question 3

What does a trade union labour market diagram look like?

Question 4

Why does a trade union labour market diagram look as it does?

Answer 4

TU disagrees with the competitive equilibrium wage rate - raises it - min. lvl workers must be paid to supply labour - this lvl becomes the supply curve until the supply curve rises above that lvl - the trade union wont allow any supply of labour below the new level but wont stop firms paying workers more

Question 5

What are the affects of trade unions in labour markets on employment & wages?

Answer 5

Wages rise bc of the new equilibirum level set by the trade union but employment falls bc the no. of workers willing and able to work for the new given wage now exceeds the number firms are willing to hire - increased unemploymentOverall - in comp. markets - TU intervention benefits some - but some lose their jobs - distorts competitive labour market outcome

Question 6

What are the evaluation points for the impact of trade unions?

Answer 6

They may be more benficial in a monopsony labour marketThe influence of trade unions hinges on the ‘union density’Success/Impact of TU showed by ‘union markup’ - comparison between wages of workers in a TUand workers in a similar industry not in a TUReal world evidence suggest TU power is rlly limited - bc of strict legislation (e.g. ‘closed shop’ TUs illegal) & striking laws - at least 75% of TU need to agree to strike- restructuring of UK economy means you’re now fighting against many smaller firms not one dominant one - harder