Labour Flashcards
what is a trade union
trade union is an organisation of workers of a particular industry that collectively bargain to improve wage and non-wage working conditions to protect workers
Diagram for trade union in normal market
Positive of trade unions
Negative of trade union
second Negative of trade unions
Evaluation points for trade union
Regulation needed to prevent abuse of union power?
Impact of union strength determined by union density
Changes in structure of economy
Examples of legislation on trade unions
Thatcher in 1980 made closed trade unions illegal
As well as strike regulation:
Legal only if a certain % agree on when voting in secret
Only allowed to strike against their own employer limiting power of trade unions
Reasons for wage differentials
(regional variances in wages)
Occupational and Geographical immobility in the north to south
Restructuring of the UK economy, specialisation. Service jobs in south, manufacturing in north. MRPs lower in north
Reasons for wage differentials (ethnic group variances)
Minority groups on average have poor educations so low MRPs, employment prospects are low, less power to bargain for higher wages. Earning potential lower.
Lack of language proficiency, employability is low. Access to higher earning jobs is lower.
Advantage of wage differentials
Promotes incentives for lower earners to work harder or pursue skills training to be more productive, increase their MRPs to access high paid jobs.
Higher income earners often benefit lower income earners through the trickle down effect
Disadvantages of Wage differentials
Income inequality created. Poverty, lower living standards, more welfare benefits which puts strain on government finance. Can restrict growth and social problems like crime.
Trickle down effect may not occur
Income and Wealth are mutually reinforcing
Reasons for differentials in income and wealth
Age (earning potential)
Education differences
Wage differentials
2 measures of income inequality
Lorenz curve (Visual indicator)
Gini coefficient (mathematical indicator)
Diagram of NMW on monopsony market
increases employment and wages to competitive levels improving efficiency of labour markets
Ways to solve wage differentials and inequality and reduce poverty
Max price
Min Price
Transfer payments
Governments adjust tax system
Gov spending on essential goods
increasing tax for higher earners
Raise top tax band currently at 45%
Reduce gap
But up to a certain point shown by laffer curve
Emigration of skilled workers out of country due to high tax
creates a productivity gap
Laffer curve
Shows that once a certain point is reached if people are taxed more then this will disincentivise them to work, negative income effect where they now work less and earn less to reach a target income. Reduces tax revenue for gov
Max price
Caps incomes of higher earners
Prevents exorbitant salaries or pay rises for the rich that would otherwise widen inequality gap
Helps to alleviate cost burdens on firms
Max price and min price negative effect
Distorts the efficiency of labour market outcomes
Min price
Price floor above equilibrium set at equitable levels
Directly boosts poor incomes
Negative of min price
Unemployment
Real wage unemployment
Harms those it’s supposed to protect
Only those with high MRPs will be hired
Poorer people have less skills so cannot get jobs
Worsens inequality gap
National minimum wage will be imposed when…
Governments feel that wages in a competitive labour market are not high enough for workers to sustain a satisfactory standard of living
Pros of NMW
Powerful weapon to fight against a monopsonist employer
Reduce economic inactivity
Increase in Fiscal intake for the gov
Increase in fiscal intake means
If incomes rise then government will collect more in tax revenue
Reduces strain on gov finances
Allows government to deleverage debts
Allows to fund spending on public services which can further help poverty like education
Cons of NMW
Unemployment
Unintended consequences
Regional differences in pay that aren’t accounted for by NMW
