Monopsony, Unions, & Bilateral Monopoly Labor Markets

Monopsony, Unions, & Bilateral Monopoly Labor Markets

Imperfectly Competitive Labor Markets

Monopsony ModelMonopsony Model

Critical Attributes of Monopsony Labor Markets:There is a single buyer of a certain labor typeMovement of labor is restricted, either geographically or because workers would have to acquire new skillsThe employer is a “wage maker,” because the wage rate it must pay varies directly with the number of workers it employs

Graphing MonopsonyGraphing Monopsony Upward sloping supply curve

S = ARCThe more workers a firm attempts to employ the higher the wage they must offer

MRC is higher than the wageIf monopsonists increase wages, they must do so for all workers they employ

Equilibrium wage & employmentMonopsonists hire the quantity of workers at MRC = MRP, at the wage on the supply curve directly below MRC = MRP

UnionsUnions Union: a cooperative collective of laborers Unions usually seek to raise wages

Demand enhancement (increase product demand, increase productivity, or change the price of other inputs)Exclusion (reduce the supply of labor)Inclusion (increase the size of the union)

Unions typically achieve higher wage rates, but at lower levels of employment

Unions shift the MRC & supply curve and/or demand curve (remember: D = MRP)

Union Demand EnhancementUnion Demand Enhancement

Exclusive UnionismExclusive Unionism

Inclusive UnionismInclusive Unionism

Bilateral MonopolyBilateral Monopoly A monopsonistic labor

market that is unionized Example: the auto

industry Indeterminate outcome

…depending on bargaining between the union and employer… between Wm and Wu

Practicing Imperfectly Competitive Labor MarketsPracticing Imperfectly Competitive Labor Markets

Workbook Unit 4 Lesson 3 Activity 49

Homework: Chapter 26 #2, 3, 7, 8, 9