HOW UNIONS RAISE WAGES

How can labor unions raise the wages and improve the irking condition of their members? Unions gain mt.rrIcit power by obtainment a legal monopoly on the Parisian of isobar services to a,particular/or firm or industry. Using this monopoly, they compel’ firms to provide wages,benefits, and working conditions that are above the competitive level. For example, if nonunion plumbers. earn $15 per hour in Alabama, a union .might bargain with a large construction firm to set the wage at $25 per hour for that firm’s plumbers.

Figure 13-7 shows the impact of agreed-upon high standard wages, where the union forces employers to pay wages at the standard rate shown by the horizontal line JT. The equilibrium is at E, where intersects the employers’ demand curve. Note that the union has not directly reduced supply when !t sets high standard wage rates. How does the market Raising the standard wage to “increases wages and decreases the employment in the unionized labor market. Because of supply and demand imbalance, woken from E to F cannot find employment in this market,

The need to prevent nonunion competition also explains many of the political goals of the national labor movement. It explains why unions want to limit immigration; why unions support protectionist legislation to limit imports of foreign goods, which are good! made by workers who are not members of American unions; why quasi unions like medical as associations fight to restrict the practice of medicine by other groups; and why unions sometimes oppo . deregulation in industries such as trucking, CO mi cations, and airlines

Raising the standard wage to “increases wages and decreases the employment in the unionized labor market.Because of supply and demand imbalance, woken from E to F cannot find employment in this market, If unions push real wages too high for an entire economy, firms.will demand E’, while woken will supply F. Thus the black arrow from E’ to F represents the amount of classical unemployment. This source of unemployment is particularly important when a country cannot affect its price level or exchange rate, and it differs from the unemployment caused by insufficient aggregate demand.

level? At the high wage rates, employment is limited by the firms’ demand for labor. The number of workers who seek employment exceeds the demand by the segment E F. These excess workers might be unemployed and waiting for vacancies in the high paying union sector, or they might become discouraged and look for jobs in other sectors, The workers from E to F are as effectively excluded from jobs as they.would be if the union had directly limited entry.

The need to prevent nonunion competition also explains many of the political goals of the national labor movement. It explains why unions want to limit immigration; why unions support protectionist legislation to limit imports of foreign goods, which are good! made by workers who are not members of American unions; why quasi unions like medical associations fight to restrict the practice of medicine by other groups; and why unions sometimes oppo . deregulation in industries such as trucking, Communication, and airlines.

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