Chapter 26 Imperfect Labor Market

Unions Unions – improve income, safety and job security of its members Right to work laws – it is illegal to require union membership for employment Types Craft unions – represent a skill Industrial unions – represent an industry Shops Closed shop – employee must belong to the union Union shop – employee must become a member within a time period

Union Strategies Increased Demand – Enhanced Unions – raise wages by increasing the demand for labor Supply restriction Job protection

Collective Bargaining Firm management meets with union management to work out a contract Bilateral Monopoly – collective bargaining Monopsony – Single buyer of labor  As a single buyer it will pay a wage lower than the equilibrium wage and hire fewer workers Monopoly – Single seller Contract Wages Working Hours Benefits Working Conditions Job Security Grievance Procedure

Options Strike by union Boycott by the union – urge consumers not to buy the product Lockout by firm Strengths Firm – has inventory Union – has a strike fund

Issues Minimum wage Causes unemployment in teens Geographic immobility Perfect mobility of labor – wages will equalize Barriers  Information  Moving costs  Family and friends  Culture Economic rent– excessive pay with no increase in productivity (Quasi-rent) Superstar effect – little difference in ability but a lot in compensation  Pro sports stars  Rock stars  Movie and TV stars  Supermodels Discrimination –hurts those who discriminate Types Wage Employment Results Winners  Black owners  White workers Losers  Black workers  White owners