W4P3 - Notebook LM Flashcards
What is the role of unions in the labour market, according to this lecture?
Unions engage in collective bargaining to negotiate wages and working conditions, impacting both union members and sometimes non-members through negotiated wage coverage.
What is the potential impact of a minimum wage?
In a standard competitive labour market model, a minimum wage set above the market-clearing wage is expected to cause unemployment, but this might not be the case when firms have monopoly power.
What is the difference between unionization rates and union coverage?
Unionization rate refers to the percentage of workers who are members of a union, while union coverage refers to the percentage of workers whose wages are determined by union negotiations, which can be significantly higher.
How do unions’ preferences affect their decisions regarding wages and labour supply?
Unions have different preferences that can be represented by indifference curves, including a “jobs-first” approach, a “balanced” approach, and a “hardline/wage-first” approach.
What is a “jobs-first” approach by a union?
A “jobs-first” approach prioritizes maintaining high employment levels, even if it means accepting relatively lower wages.
What is a “hardline” or “wage-first” approach by a union?
A “hardline” approach prioritizes high wages, even if it leads to lower employment levels.
How do firms respond to wages set by unions, according to the lecture?
Firms are considered “wage takers” and adjust their labour demand based on the labour demand schedule, hiring labour up to the point where their marginal product of labour is equal to the wage rate that has been negotiated by the union.
How does increased productivity affect labour demand in the context of union negotiations?
Increased productivity shifts the labour demand curve to the right, potentially leading to higher wages and more employment, with the exact outcome depending on the union’s preferences.
What is the collective labour supply schedule (CLS)?
The collective labour supply schedule shows the relationship between the wage rate and the amount of labour that unions are willing to supply, given their preferences and labour demand, and is upward sloping.
How do unions negotiate wages in practice?
Unions negotiate nominal wages, taking their inflation expectations into account. Real wages are then determined by the nominal wage adjusted for inflation.
What happens when actual inflation differs from expected inflation?
If actual inflation is higher than expected, the real wage will be lower than anticipated, which causes the collective labour supply schedule to shift downwards and can lead to lower unemployment.
What is the expectations-augmented Phillips curve, according to the lecture?
The expectations-augmented Phillips curve models the relationship between inflation and unemployment, indicating that unemployment is below the natural rate when actual inflation exceeds expected inflation.
How does lower real wages affect firms’ hiring decisions?
When real wages are lower, it becomes cheaper for firms to hire, which leads to increased employment and reduced unemployment.
