Presentation is loading. Please wait.

Presentation is loading. Please wait.

The impact of trade unions Outline 1. Unionism & union objectives 2. Economic models of union effects 3. The effects of unions - evidence.

Similar presentations


Presentation on theme: "The impact of trade unions Outline 1. Unionism & union objectives 2. Economic models of union effects 3. The effects of unions - evidence."— Presentation transcript:

1 The impact of trade unions Outline 1. Unionism & union objectives 2. Economic models of union effects 3. The effects of unions - evidence

2 1. Unionism & union objectives A trade union is a continuous association of wage-earners for the purpose of maintaining or improving the conditions of their working lives. (Webb & Webb 1896) Objectives a) Improved wages b) Improved terms & conditions c) full employment d) industrial democracy e) voice in government ….collective bargaining

3 1. Unionism & union objectives International comparisons of unionism (1994) CountryMembershipCoverage France995 Germany2992 Sweden9189 UK3447 Japan2421 US1618 Importance of coverage Flexible labour markets?

4 1. Unionism & union objectives Union membership, Country France Germany *Sweden UK Japan US Why has there been a decline?

5 2. Economic models of union effects The effect of unions depends on the structure of the firms product market competitive monopsony Several models a) monopoly union model* b) bilateral monopoly* c) right-to-manage model d) efficient bargains model

6 A) Monopoly union model Union has monopoly power in the labour market Firm operates in a competitive/monopolistic (product) market Effect on W & E depends on union power ability of the firm to resist (…market) Two outcomes a) W rise BUT E declines to reduce costs of production – See Figure b) W rise & E increases - productivity deal

7 fig O Q of labour Q1Q1 S D £ W1W1 Monopoly union facing producers under perfect competition Monopoly union facing producers under perfect competition

8 B) Bilateral monopoly Union has power in the labour market Firm has power in the product market Outcome depends on bargaining strength of the union strength of the firm No equilibrium; range of outcomes maximum W is where MC L = MRP minimum W is given by the monopsony outcome See Figure 2

9 fig O Q of labour £ W1W1 Q1Q1 MRP L MC L 1 No union S 1 (=AC L 1 ) No union Bilateral monopoly Monopsony: no union

10 3. The effects of unions - evidence A) The effect on wages union versus non-union wages US: 10-20% more UK: 10% W. Germany: 6% unions also reduce wage dispersion: skilled/unskilled; white/non-white workers The effect on total compensation unionised firms - poor conditions higher wages to compensate

11 3. The effects of unions - evidence B) Effects on employment unions reduce employment growth C) Effect on hours of work convert standard hours into overtime hours - higher pay D) Effect on productivity & profits positive if voice effects occur negative if they succeed in introducing restrictive practices outcome depends on quality of union- management relationship

12 Conclusion Unions are an important part of the economy Theoretically: effect depends on market structure They do increase W and reduce E. Which model? Wider effects in practice


Download ppt "The impact of trade unions Outline 1. Unionism & union objectives 2. Economic models of union effects 3. The effects of unions - evidence."

Similar presentations


Ads by Google