4.1.6.5 The influence of trade unions in determining wages and levels of employment Flashcards
(13 cards)
What are the main goals of trade unions?
Increase wages
Improve working conditions
Enhance job security
Protect workers’ rights
What factors determine a union’s ability to influence wages?
Union density (% of workers unionized)
Elasticity of labour demand (more inelastic → greater power)
Profitability of firms (high profits → more wage concession)
Legal environment (right-to-strike laws)
Substitutability of labour (harder to replace → more power)
How does union introduction affect a perfectly competitive labour market?
Before: Wage = W₀, Employment = Q₀ (D=S)
After: Union pushes wage to Wᵤ > W₀
Result: Unemployment (Qₛ > Qᴅ)
Diagram: Horizontal wage line at Wᵤ above equilibrium
How does union introduction affect a monopsony market?
Before: Wage = W₂ (< competitive W₁), Employment = Q₂
After: Union negotiates wage up to W₃ (toward MRP)
Result: Can ↑ both wages and employment (Q₂ → Q₃)
Diagram: New wage floor between W₂ and W₁
Draw union wage effect in perfect competition. Label:
Original W₀/Q₀
Union wage Wᵤ
Unemployment gap
Supply-demand intersection (W₀/Q₀)
Horizontal line at Wᵤ → Qᴅ < Qₛ
Show how unions can fix monopsony exploitation.
Monopsony: W₂/Q₂ (MC=MRP)
Competitive: W₁/Q₁ (S=D)
Union: Sets wage ∈ [W₂, W₁] → employment rises
What is the wage-employment trade-off for unions?
Higher wages → lower employment if:
Wage > MRP
Labour demand is elastic
Exception: In monopsony, can ↑ both
Give an example of union impact in different markets.
Perfect competition: UAW in auto industry → higher wages but job cuts
Monopsony: Teachers’ unions in rural areas → ↑ wages without job loss
UAW stands for the United Auto Workers, a labor union in the United States (including Puerto Rico) and southern Ontario, Canada. The union represents workers in the automotive, aerospace, and agricultural implement industries. It was founded in 1935 and has historically played a significant role in negotiating higher wages and benefits for automotive manufacturing workers.
Key aspects of the UAW:
Membership:
The UAW represents approximately 145,000 automobile workers employed at companies like Ford Motor Company, General Motors, and Stellantis.
History:
Founded in 1935 as part of the Congress of Industrial Organizations (CIO), the UAW grew rapidly from the 1930s to 1950s.
Notable Figures:
Walter Reuther (president 1946-1970) played a key role in the union’s development.
Strike Action:
The UAW has engaged in strike action, including strikes against General Motors in 1945-1946 and 2019, to achieve its goals.
Benefits of Union Membership:
Union membership often includes higher wages, better benefits (including healthcare, vacation, and education), and protection from arbitrary discipline or terminations.
Why does labour demand elasticity affect union success?
Inelastic demand (e.g., nurses): Unions can ↑ wages significantly with small job loss
Elastic demand (e.g., retail): Wage hikes cause large employment drops
Are unions always beneficial for workers?
Pros: Higher wages, better conditions
Cons: Potential job losses, may hurt non-union workers
Net effect: Depends on market structure (helpful in monopsony)
Contrast union effects in perfect competition vs. monopsony.
Market Wage Change Employment Change
Perfect competition W₀ → Wᵤ (↑) Q₀ → Qᴅ (↓)
Monopsony W₂ → W₃ (↑) Q₂ → Q₃ (↑)
How might governments respond to union actions?
Support: Minimum wage laws (reinforce union goals)
Restrict: Anti-strike legislation
Balance: Encourage wage-productivity linkage
