1. Labor market institutions 1999 Michigan State University. All rights reserved. Microeconomics

2. Labor market institutionsslide 2 Interventions in the labor market 1)Government interventions. 2)Unions.

3. Labor market institutionsslide 3 Government: the minimum wage The minimum wage is a price floor set in the market for labor.

4. Labor market institutionsslide 4 Government: the minimum wage The minimum wage is a price floor set in the market for labor. $7/hr. $8/hr. D S wage L minimum

5. Labor market institutionsslide 5 Effects of minimum wage 1)Wages will rise in the affected market.

6. Labor market institutionsslide 6 Effects of minimum wage 1)Wages will rise in the affected market. 2)Some unemployment will result.

7. Labor market institutionsslide 7 $4.75/hr. $5.15/hr. D S wage L minimum Excess supply = unemployment

8. Labor market institutionsslide 8 Union effects A union is a “cartel” of workers to seek higher wages and changed working conditions.

9. Labor market institutionsslide 9 Union effects A union is a “cartel” of workers to seek higher wages and changed working conditions. Unions are exempt from the Sherman Act.

10. Labor market institutionsslide 10 Fact Most workers in the U.S. are not union members. About 15 percent of the labor force is unionized.

11. Labor market institutionsslide 11 History of unions a)1886 was the founding of the American Federation of Labor (AFL). An amalgam of craft unions.

12. Labor market institutionsslide 12 History of unions a)1886 was the founding of the American Federation of Labor (AFL). An amalgam of craft unions. b)Wagner Act (1935). Helped formation of unions during the Great Depression by setting standards of conduct for firms on how they dealt with unions.

13. Labor market institutionsslide 13 History of unions a)1886 was the founding of the American Federation of Labor (AFL). An amalgam of craft unions. b)Wagner Act (1935). Helped formation of unions during the Great Depression by setting standards of conduct for firms on how they dealt with unions. 1)Firms couldn’t interfere with union formation. 2)Firms couldn’t refuse to bargain collectively.

14. Labor market institutionsslide 14 History of unions Congress of Industrial Organizations (CIO) was formed in the 1930’s. Was a group of industrial unions.

15. Labor market institutionsslide 15 Taft-Hartley Act (1947) 1)Changed the balance of power between unions and employers in favor of the employers.

16. Labor market institutionsslide 16 Taft-Hartley Act (1947) 1)Changed the balance of power between unions and employers in favor of the employers. 2)Set standards of conduct for unions. Prohibited closed shop (made it illegal to force all employees to be members of the union to get hired).