6.5 the influence of trade unions in determining wages and level of employment Flashcards
what is a trade union?
a group of workers who join together to maintain and improve their conditions of employment e.g. pay, etc
what is collective bargaining and how do trade unions use it?
a process by which wage rates and other conditions of work are negotiated and agreed upon by a union or unions with an employer or employers
this determines the market wage rate, and now employers decide how many to employ at this wage rate
what industries have a strong trade union
London transport, rail industry and other public areas of employment
why has the balance of power shifted from trade unions to employer in the UK?
Employment acts have restricted legal rights of trade unions
and the impact of globalisation and international competition to the UK labour market
what impact could trade unions have on previously competitive markets?
The market would become imperfectly competitive, as through collective bargaining the trade union negotiates a minimum wage rate (raising the previous wage rate from w1 to w2).
what could be a consequence of trade unions forming in a perfectly competitive markets
unemployment will rise as at the new wage rate set by the union, employers only wish to employ at l2 but l3 workers are willing to work at the new wage rate, therefore we get an excess supply of labour and unemployment in the labour market
how would a Keynesian economist contradict that unemployment will rise when a trade union intervenes in a perfectly competitive market?
If a Union can ensue the demand for Labour will shift to the right to counteract the threat of unemployment by agreeing to accept technological progress, working with new capital and upskilling workers. the increased productivity of these workers therefore allows for higher wages and less unemployment
secondly employment and wages can rise if the trade union is negotiating with a firm in an expanding goods market, e.g. derived demand increase demand for output leads to increased demand for labour.
Apart for collective bargaining how else can trade unions try to increase pay and what upsides does this method have?
by using the closed shop theory Unions will try to keep non union members out of the labour market if they are willing to supply their labour cheaply therefore increasing the inelasticity of the labour supply curve to achieve higher wages, employment may rise but only for non union members
what would be the effect of introducing a trade union into a monopsony labour market?
trade union may be able to increase both wage rate and employment toward the perfectly competitive market by using collective bargaining and fixing the wage rate from w1 to w2.
this intern makes the Monopsonist a wage taker, and monopsonist hire works up until MRPl=MCl
