Chapter 25 Slides

8/7/2019 Chapter 25 Slides

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Types of Labor Unions

1. Craft union.

2. Industrial union.

3. Public employee union.


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Decline in Union Membership

In the 1950s, around one-third of the laborforce was unionized.

By 1983, 20% of the labor force wasunionized.

By 2007, only 12.1% of the labor forcewas unionized.


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Private versus Public Sector

Unions

Unionization rates are much higher for

public sector employees than for privatesector employees.

In 2007, 35.9% of public sector employeeswere union members, versus 7.5% ofprivate sector employees.


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Largest Labor Unions (2005)

Union Membership

National Education Association 2.73 million

Service Employees International Union 1.51 million

American Federation of State, County &Municipal Employees 1.46 million

International Brotherhood of Teamsters 1.40 million

United Food and Commercial Workers 1.38 million

American Federation of Teachers .83 million

United Steelworkers .75 million International Brotherhood of Electrical Workers .70 million


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Demand Curve for a Union

As a kind of cartel, a labor union has

market power and faces a downwardsloping demand curve for its labor.

Thus, a labor union faces a trade-offbetween wages and employment.


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Demand Curve for a Union


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Union Goals

Given the trade-off between wages andemployment, all unions tend to havecertain predictable goals:

1. Reduce the elasticity of demand forunion labor.

2. Increase the demand for union labor.

3. Decrease the supply of union labor.


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Reducing the elasticity of

demand for union labor

Reducing the elasticity of demand for

union labor means that fewer jobs will belost with any wage increase.

See the next two slides.


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More Elastic Demand Curve


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Less Elastic Demand Curve


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Union Goals

The elasticity of demand for union laborcan be reduced by:

a. Reducing the availability of substitutefactors.

See Example 2A on page 25-3.

b. Reducing the availability of substituteproducts.

See Example 2B on page 25-3.


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Union Goals

The demand for union labor can beincreased by:

a. Increasing product demand.

See Example 3A on page 25-4.

b. Increasing the MPP of union workers.

See Example 3B on page 25-4. c. Increasing the prices of substitutefactors.

See Example 3C on page 25-4.


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Union Goals

The supply of union labor can be reducedby:

1. Closed shop requires unionmembership as a condition foremployment.

2. Union shop requires employees tojoin the union within a specified time.


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Taft-Hartley Act

The Taft-Hartley Act of 1947:

1. Prohibited closed shop agreements.

2. Gave the individual states the power topass right-to-work laws.


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Right-to-work Laws

Right-to-work laws prohibit union shops.

In the right-to-work states, every shopmust be an open shop.

Right-to-work laws reduce unionbargaining power.


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Collective Bargaining

A union might use the threat of a strike to

negotiate a wage rate above equilibrium.

Collective bargaining will generally result

in higher wages and fewer workersemployed.


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Without a Union


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After Collective Bargaining


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Monopsony

Monopsony a lone buyer in a factormarket.

An example of a monopsony employerwould be a company that is the onlyemployer in a small town.

See Example 5 on page 25-6.


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A monopsony has market power and faces

an upward sloping labor supply curve.

A monopsonys MFC curve will be twice as

steeply upward sloping as its labor supplycurve.

Monopsony


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Example 6: Monopsony Employer

Wage Rate Labor Quantity Factor Cost MFC$7 0 $0 X

8 1 8 $89 2 18 10

10 3 30 1211 4 44 1412 5 60 16


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Example 6: Monopsony Employer


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Example 7A: Monopsony


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Union and Monopsony

Workers employed by a monopsony have

a strong motivation to form a union.

A union negotiating with a monopsony

may be able to obtain a higher wage rateand a greater quantity of labor employed.


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Example 7A: Monopsony


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Union and Monopsony


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Unions and Wages

Research indicates that unions increase

the wages of union employees, butdecrease the wages of nonunionemployees.

See Example 8 and 9 on pages 25-9 and25-10.


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Unions and Wages

Higher union wages will also result in

higher prices for union made products.

See Example 10 on page 25-11.


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Unions and Productivity

The traditional view holds that unions hurtproductivity due to:

1. Strikes.

2. Unnecessary staffing requirements

(featherbedding). 3. Keeping willing employers and

employees apart.


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Unions and Productivity

An alternative view is that unions increaseproductivity by:

1. Providing union workers with acollective voice.

2. Attracting higher quality workers.

Documents

Chapter 25 Slides