Chapter 26 Imperfect Labor Market Unions n Unions

Chapter 26 Imperfect Labor Market

Unions n Unions – improve income, safety and job security of its members n n n Right to work laws – it is illegal to require union membership for employment Types n Craft unions – represent a skill n Industrial unions – represent an industry Shops n Closed shop – employee must belong to the union n Union shop – employee must become a member within a time period

Union Strategies n Increased Demand – Enhanced Unions – raise wages by increasing the demand for labor n Supply restriction n Job protection

Collective Bargaining Firm management meets with union management to work out a contract n Bilateral Monopoly – collective bargaining n Monopsony – Single buyer of labor n § n n n n As a single buyer it will pay a wage lower than the equilibrium wage and hire fewer workers Monopoly – Single seller Contract Wages Working Hours Benefits Working Conditions Job Security Grievance Procedure

n n Options n Strike by union n Boycott by the union – urge consumers not to buy the product n Lockout by firm Strengths n Firm – has inventory n Union – has a strike fund

Issues Minimum wage n Causes unemployment in teens n Geographic immobility n Perfect mobility of labor – wages will equalize n n Barriers § § Information Moving costs Family and friends Culture Economic rent– excessive pay with no increase in productivity (Quasi-rent) n n Superstar effect – little difference in ability but a lot in compensation § § Pro sports stars Rock stars Movie and TV stars Supermodels Discrimination –hurts those who discriminate n Types n n n Wage Employment Results n n Winners § § n Black owners White workers Losers § § Black workers White owners