Trade Unions Flashcards
What is a trade union?
An organisation of many workers that bargain for higher wages and better working conditions
Why is a trade union a labour market imperfection?
Distorts competitive labour market outcomes
How do trade unions bargain?
Collectively
Collective bargaining
Trade union bargains on behalf of all workers within the union
‘Closed shop’ trade union
In a given profession, all workers are part of one trade union
What does a closed shop trade union become?
And monopoly supplier of labour
therefore controls labour supply at a given wage rate
Does the supply curve of labour tell us?
The quantity of workers who are willing and able to work at different wage rates
All workers below pink dot on supply curve would be….
Very satisfied with the wage rates of WTU as they were willing and able to work for lower wage rates
Beyond the pink dot on the supply curve…
If employer wanted to employ more workers, need to offer a higher wage rate in order to incentivise more people to work
The wage rate set by the trade union isn’t high enough
What happens to the supply curve beyond the pink dot?
Reverts back to the original
Trade union supply curve vs competitive outcomes: what happens to wages and employment?
Wages higher compare to competitive outcomes
Employment lower compared to competitors outcomes
Up until what point are workers getting a good wage and are employed?
Qtu
Up until QTU
Workers getting a good wage and they are employed
QTU to QC
Unemployed
People have lost their jobs - no benefit
What happens when trade unions bargain for higher wages?
Distorts sufficient labour market outcomes
Significant amount of people are losing out
Is the risk of an increased cost to firms?
Could lead to bankruptcy in the LR
EVAL: in a monopsony labour market
Trade unions increased wages and employment
make outcomes more efficient
EVAL: Strength of trade union power
greater % of union density, the greater the trade union power is, the greater the bargaining power the trade union has, to fight for higher wages.
EVAL: how is the strength of trade union power measured?
Union density
Eval: union density
Proportion of the workforce in a given profession that are part of a given trade union
EVAL: success determined by union mark up
The bigger the union mark up, the bigger the success of the trade union
EVAL: union mark up
Difference in wage between workers are getting who are part of the trade union in a given profession, compared to workers in similar profession who are not part of a trade union
EVAL: Real-world evidence proving limited power of trade unions
Legislation
Striking
EVAL: legislation
Strict since 1970s against trade unions
Closed shop trade unions = illegal
