Principles of Economics

Transcription

1 Principles of Economics 2nd edition by Fred M Gottheil PowerPoint lides prepared by Ken Long Chapter 16 Wages and Employment: Monopsony & Labor Unions 2/26/ What is a Labor Union? An association of workers, each of whom transfers the right to negotiate wage rates, work hours, and working conditions to the association 3 Types of Unions Craft or trade union--members practice the same craft--plumbers, etc. Industrial union, workers in the same industry--auto, steel Public employees union, members are government employees--teachers, police, etc. Employee Associations: American medical association, etc--not really unions but similar in many ways 4 Brief History of Unions Early unions, groups of craft workers Knights of Labor, early attempt at a national union of all workers Problems faced by the Knights, skilledunskilled debate In early days, courts very anti-union 5 AFL, American Federation of Labor, formed in 1883 Attempted to organize the skilled craft unions 6

2 Congress of Industrial Organizations (CIO) Formed in 1938, attempt to organize the industrial workers Auto and teel industries among their first successes AFL-CIO merged in the 1950 s 7 What are the major Acts? Norris-La Guardia Act of 1932 Wagner Act of 1935 Taft-Hartley Act of 1947 Labor Management Reporting & Landrum-Griffin Act 1959 Civil Rights Act of Norris-LaGuardia Act, 1932 Outlawed yellow-dog contracts in which workers agreed to not join unions in order to get a job Restricted injunctions against unions 9 Wagner Act, 1935 (national labor relations act) Gave workers the right to join unions if majority of workers vote to Required management to engage in good faith bargaining Created national labor relations 10 board Taft-Hartley Act, 1947 Closed shops illegal, union shops illegal if state passes right to work law Certain strikes illegal Cooling off period can be ordered in national emergency cases 11 What is a Closed hop? An arrangement in which a firm may hire only union labor 12

3 What is a Union hop? An arrangement in which a firm may hire nonunion labor, but every worker hired must join the union by a certain date Landrum-Griffin Act, 1959 Unions must hold elections, keep financial records Union Behavior, Ways of Raising Wages Increase the demand for labor Decrease the supply of labor Collective bargaining Wages Increasing the demand for labor D1 D2 Labor 15 L 1 L Increasing the demand for Union Labor Wages Decreasing the supply of labor 2 Trying to increase the demand for the product produced Look for the Union Label Improve the productivity of union labor Restrict the supply of non-union made goods, such as via import restrictions Featherbedding, trying to require more work than necessary L 2 L 1 D 1 Labor 18

4 Decreasing the supply of labor Exclusive unions, such as the craft unions, via initiation fees, apprenticeship programs Employee associations such as AMA often accused of restricting supply Usually requires help from the government 19 Wage Rate ' 0 B A Q 2 Q 1 Q 3 Quantity of Labor '. This is the supply curve the union may want management to believe exists. It says no one will work for less than. D uccessful Collective Bargaining by Union What is a Monopsony? A labor market with only one buyer Why is the upply Curve for Labor upward sloping? Because as the wage rate increases the incentive for more people wanting to work increases W2 W1 What is Marginal Labor Cost? The MLC is the cost of hiring one more worker Q1 Q

5 Why does the MLC Curve lie above the upply Curve? When the Monopsonist increases employment, it must offer a higher wage to all workers W MLC Q What is Marginal Revenue Product? MRP is the addition to total revenue that one more worker contributes How many workers will a firm hire? It continues hiring workers as long as MRP > MLC and stops when MRP = MLC Why is the MRP Curve downward sloping? Because each additional worker hired adds less and less to total product W W c 16 MLC MRP (D) 29 6,000 L Labor c 30 30

6 Comparison of Monopsony and Competition Monopsony wages are lower, hire less labor than in a perfectly competitive market 31 W $26 $16 MRP = MLC Return to Monopsony Power 6,000 MLC MRP Q When workers are unionized, who is the supplier of labor? The Union For more information about labor disputes: employment/index.html pg.html What happens if the company offers a lower wage than $26? Collective bargaining ensues where the company and the labor union negotiate What is a trike? The withholding of labor by a union when the collective bargaining process is unacceptable to the union 35 36

7 What problem does the union have at $26? It must control the supply of labor or it will have too many workers and weaken its bargaining power For more information about labor unions: Union Impact on wages tudies by Lewis and others find average union wage 10-15% higher than comparable nonunion labor In some industries, this is higher, others lower Does not include fringe benefits 39 Union Impact on nonunion waqes, 2 possibilities pillover effect--fewer jobs in the union sector means a greater supply of labor to nonunion jobs, lowers wages in the nonunion sector Threat effect--do nonunion firms pay more due to the threat of unionization? 40 Effect of Labor Unions on Union and Nonunion Wages (spillover effect) Changes in supplyconditions and wagerates in the unionizedsector can bring on changes in supplyand wage rates in thenonunionized sector. Wage Rate ' U Q' Q U U Quantity of Labor (a) Unionized ector U D U Wage Rate 0 1 NU Q NU Q' NU Quantity of Labor (b) Nonunionized ector 2 ' NU D NU Union Impact on Productivity, 2 different views Traditional, sees unions as harming productivity via strikes, restrictive work rules, etc. New view (Freeman and Medoff)-sees unions as giving workers a collective voice, reduces turnover of workers, lowering training costs, worker married to the firm 42

8 What is a Monopsony? Why is the upply Curve for Labor upward sloping? What is Marginal Labor Cost? What is Marginal Resource Product? How many workers will a firm hire? Why is the MRP Curve downward sloping? What wage rate will the union agree to work? What is a trike? What is a Closed hop? What is a Union hop? END 45