Trade Unions Flashcards
What are the primary functions of a trade union?
- Bargain for higher wages
- Better working conditions
- Security of employment
What does a trade union cause?
Labour market failure when there is an increase in wages from W1 to Wtu
- there is a contraction on the demand for labour curve
- (Q1 - Qd) is the quantity of labour that is made redundant
- (Qd - Qs) is level of unemployment created
What happens to unemployment?
total area of unemployment is larger as there is now excess supply of labour as when wages increases, firms cop increase and so they make workers redundant
How does elastic demand for labour effect the impact of trade unions?
- when trade union members bargain for higher wages quantity of labor demanded decreases more than proportionally
- there is a large level of unemployment created as there is a larger excess of supply
- leads to worse labour market failure
How does inelastic demand for labour effect the impact of trade unions?
- when trade union members bargain for higher wages, quantity of labor demanded decreases less than proportionally
- there is a small level of unemployment created as there is a smaller excess of supply
Union Density
The percentage of workers in an industry that is part of trade unions
- The higher the percentage of workers that are in the trade union the higher the density
How does union density effect the impact of trade unions?
- if not a lot of people in a trade union there wouldn’t be a large impact
- if lots of teachers start striking children would have to work from home which is disruptive as parents have to stay off work
- in the past a lot more people are part of trade unions especially in the manufacturing sector where working conditions and wages were very low
- however, less people now due to the industrialization
Evaluation of the impact of trade unions on a competitive labour market
1. Union Density
2. Elasticity of demand for labour
3. Profitability of the employer
- when the employer is more profitable, trade unions are more likely to be successful when bargaining higher wages as the employer has enough profits to do so
- if have enough financial reserves they are able to pay people who go on strikes and so have more bargaining power as more people are going to strike
4. Unemployment rate
- wont have a lot of bargaining power when lots of people are unemployed as no point asking for higher wages when not alot of poeple have jobs
- arent going to get lots of support from the public
- when wages increase, prices increase so demand for product falls, derived demand for labour falls, so unemployment increases even more
5. Public support
- public support is very important as if have lots, people will vote for the TU instead of the gov
- when strike they might not do it many days in a row and try to balance it out in order to not annoy public
6. Legislation
- banned to be forced to join a trade union, as if everyone was forced union density would be 100% and strikes would be very effective
- the trade union act 2016 states that trade unions must give the gov a two-week notice they are going to be striking
- strikes need to have a 50% turnout and 40% people need to support the trade union, need to reach this threshold or the trade unions can’t have votes
7. The distruption caused by strikes
- there is a trade off as they want to cause distruption but dont want to upset the public too much
Bilateral Monopoly
Where trade unions (the monopoly seller of labour) negotiates with monopsonists (the moonopoly seller of labour) over wage rates as monopsonists don’t want strikes as make less output and trade unions don’t want strikes as workers would not be paid
Why is the supply curve elastic until Qc?
Even if workers want to supply their labor for wages below Wc they are not able to do so due to the national minimum wage
Why is the MCL curve elastic until QC?
In order to employ one additional unit of labour employers don’t need to increase the wage for all previous units of labor
- change in costs is Wm to Wc
Where will wages be set in a bilateral monopoly?
At Wc instead of Wm
Where will employment be in a bilateral monopoly?
At Qc instead of Qm
Where will the wage rate be between?
The upper limit and lower limit
What does the upper limit represent?
The maximum wage rate a firm can afford
