Week 16 and 17 Flashcards
Trade union definition
An organisation with members who are usually workers or employees, which protects the rights and pay of workers through creative bargaining
what are 4 objectives of trade unions
- protect and improve real incomes
- appeal for better working conditions
- protect against unfair dismissal
- provide job security
2 ways trade unions achieve their objectives
- collective bargaining, bringing all the workers together and bargaining on behalf of the group, collectively have more negotiating power
- industrial action, strikes or no overtime offers
what are the 3 factors that have caused the decline in trade unions
- lack of effectiveness of unions
- increased labour market flexibility, easier to move between jobs and easier for employees to find replacements
- employment legislation, restricts the power of trade unions
is there a correlation between trade unions and weekly rises in wages
no, during the 21st century trade unions have been on a decline and weekly wages continue to rise
Bilateral monopoly
Happens in an monopsony market with a trade union
One real buyer (one dominant firm) and One real seller (trade union)
3 arguements for trade unions
- employment levels protected or increased
- efficient wage theory, pay workers more they will be more productive is the theory
- Keynesian theory, giving workers more wages -> spend more which causes multiplier effect
4 arguments against trade unions
- real wage unemployment, more workers willing to work then firms are willing to hire at the trade union wage rate
- profits and employment reduced, firm may become noncompetitive if reduced profits too far
- prevent flexibility in labour market, Trade unions increase the barriers to entry for particular labour markets
- encourage cost-push inflation, by increasing wages
wage discrimination definition
takes advantage of workers different reservation wages
reservation wage definition
the minimum wage someone is willing to be paid to work for that firm
who can use wage discrimination to reduce the overall wage bill
only firms with market power can pay individuals their reservation wage
why is it almost impossible to do perfect wage discrimination
a firm has to know each worler’s reservation wage which takes perfect information and it very hard to find out the minimum someone would be willing to work for
how do firms do wage discrimination if it is almost impossible
firms may choose to pay lower wages to specific groups of worker
however it is illegal in many places within the UK
what is an example of group wage discrimination
gender discrimination - women in the workplace would receive lower wages than men
monopsony market definition
a market with one dominant buyer and many sellers
i.e a single buyer of labour
monopsony power definition
the ability of a large buyer to influence the market outcome
examples of monopsony power
How does a monopsony labour market incentivise more workers and what happens to MC because of it
to incentivise more workers have to offer a higher wage
after doing so, has to pay all employees the highered wage
as a result marginal costs increase much faster than the AC (wages)
why is MCL twice as steep as SL on a monopsony labour market graph
twice as steep as SL (AC) because any increase in wages to employ one more worker causes increases in wage rate for all workers
why is their lower wages and less employment within a monopsony labour market compared to a Perfectly competitive market
firms are profit maximisers and with monopsony power they can exploit workers by setting lower wages and employing fewer workers than in a competitive market
what are 4 problems of monopsony labour markets
- depresses wages below MRP
- Allows firms to make larger profits
- Few options for workers
- Poor working conditions?
how does setting a minimum wage effect a monopsony labour market
trade unions on a perfectly competitive labour market graphically
effect of trade unions on monoposony labour markets
effects of trade unions increasing wages too high on a monposony labour market
evaluations for trade unions for an elastic and inelastic labour market
increase in wages in an elastic causes greater unemployment than the change in wages
increase in wages in an inelastic causes less unemployment change than the change in wages
more effective in an inelastic labour demand market
