modern labour economics chapter 13 unions and the labour market
TRANSCRIPT
Modern Labour Economics
Chapter 13
Unions and the Labour Market
Table 13.1 – Union Membership and Bargaining Coverage,
Selected Countries, 1980 and 1984
Figure 13.1 – Union Membership and Membership as a Proportion
of Non-Agricultural Paid Workers, 1921-2002
Table 13.2 – Percentage of All Wage and Salary Workers Covered by a Collective
Agreement, 1997 and 2001
Figure 13.2 – Effects of Demand Growth and Wage Elasticity of
Demand on the Market Constraints Faced by Unions
Simple union model-4 assumptions
DL known
Layoffs based on seniority—LIFO Ui = f(Yi)---self-interest Wage policy is determined by majority vote. What happens? Simple model leads to problems.
Figure 13.3 – Union Maximizes Utility Subject to the Constraint of
the Labour Demand Curve: Monopoly Union
Maximize TWB and Max.Rent
TWB= W*N Economic Rent R=W-OC These are special cases of the indifference
curve approach. Here, U=f(TWB) OR U=f(∑Rents) With TWB, equilibrium is where ED=1.MD=0
With Rent max. equilibrium is at MD=OC
Union Wage Rigidity
Cartter developed a union WPP Points of tangency of DL and indifference
curves. Kink at existing wage makes WPP
asymmetrical Assumed shape of indifference curves
provides the Cartter result.
Who gets the monopoly rents?
Craft versus industrial unions-entry restricting vs. wage-setting.
Both generate a queue-excess supply—who is chosen?
Could be random or there could be favouritism. Use market-taxi medallions.
http://freakonomics.blogs.nytimes.com/2009/11/05/unfree-enterprise/
Monopoly Union Model
Max. TWB, Max Rents and Max. u=f(W,N) are all variants on the monopoly union model.
In this model, unions maximize subject to the constraint of the employer’s labour demand curve.
In response to ∆W, employers are free to lay off workers
The efficient contracts approach focuses on bargaining about both W&N
Figure 13.4 – Employer Isoprofit Curves
Figure 13.5 – The Contract Curve–-The Locus of Efficient
Contracts
Rees model-misallocation costs
http://www.jstor.org/pss/724852 Rees reference-need to access through
library website or go to hard copy in library. Unions distort the allocation of labour
resource and generate a deadweight loss. Rees estimates how large this is.
Figure 13.6 – The Demand for and Supply of Unionization
Figure 13.7 – Union Membership as a Proportion of All Workers,
Canada and United States, 1980-1997
Figure 13.8 – Work Stoppages in Canada, 1901-2000 –peaks with
inflation
Figure 13.9 – Hicks’s Bargaining Model and Expected Strike
Length
Figure 13.10 – Spillover Effects of Unions on Wages and
Employment
Figure 13.11 – Threat Effects of Unions on Wages and
Employment in Nonunion Sector
Table 13A.1 – Percentage of U.S. Wage and Salary Workers Who
Are Union Members, by Selected Characteristics, 2000