monopsony in the labour market
DESCRIPTION
Monopsony in the Labour Market. A2 Economics. Starter. Define a monopsonist employer. Draw the diagram to show the impact of a monopsony employer on the labour market. MC L. Monopsony in a Market without Trade Unions. Real Wage Rate/MRP. S = AC L. Wc. Wm. D=MRP. O. Qc. Qm. - PowerPoint PPT PresentationTRANSCRIPT
Monopsony in the Labour MarketA2 Economics
Starter•Define a monopsonist employer.
•Draw the diagram to show the impact of a monopsony employer on the labour market.
Monopsony in a Market without Trade Unions
Real Wage Rate/MRP
EmploymentQm
Wc
S = ACL
D=MRP
O
Wm
Qc
MCL
Re-Cap on Effect of Trade Unions•Unions will not supply labour below their
desired wage rate.
•Labour supply becomes perfectly inelastic.
Monopsony in a Market With Trade Unions•Due to perfect elasticity, even
monopsonist employers become a wage taker.
•National Union of Teachers and unions determine wage rate, which must be taken by the state (monopsonist employer).
Monopsony in a Market with Trade Unions
Real Wage Rate/MRP
EmploymentQm
Wc
S = ACL
D=MRP
O
Wm
Qc
MCL
Wm + tu
Qm + tu
Effective Marginal Cost
Union can keep increasing wages and employment up to here. Here employment levels will fall back.
Monopsony in a Market With Trade Unions•Market Clearing = Wc : Qc
•Monopsonist employer = Wm : Qm
•Trade Union = Wm +tu : Qm + tu
Monopsony in a Market With Trade Unions•Unions won’t supply below Wm+tu.
•Supply become perfectly elastic.
•Monopsonist employer (state) becomes a wage taker.
•Marginal Cost is constant.
Monopsony in a Market With Trade Unions• However there is a limit to how many workers will
supply themselves at the union’s wage rate.
• Beyond this point a higher wage must be paid to stimulate labour supply.
• Monopsonist faced with paying extra wage to all workers and the MCL exceeds the ACL.
• Results in a kinked curve showing the effective MCL.
Monopsony in a Market With Trade Unions
•The wage level (Wm+tu) and employment level (Qm+tu) are greater than they would have been without the involvement of a union.
•The closer the wage and the employment level is to the clearing equilibrium the more successful the trade union has been.
Do unions destroy jobs?
OrDo they act as a
counter to monopsony power and save jobs?
Effects of Unions on Monopsonist Firms•Unions act as a counter to monopsony
power, and according to the diagram can actually save jobs and influence the employment level and wage rate.
• Produce yourself a set of teaching notes and the monopsony diagram.
• You are then to have an economist speed dating session.
• You will have 3 minutes to tell your hot date all about monopsony in an attempt to ‘woo’ them with economics knowledge.
• Your date will then score you out of ten.