Modern Labour Economics Chapter 13 Unions and the Labour Market

Table 13.1 – Union Membership and Bargaining Coverage, Selected Countries, 1980 and 1984

Figure 13.1 – Union Membership and Membership as a Proportion of Non-Agricultural Paid Workers, 1921-2002

Table 13.2 – Percentage of All Wage and Salary Workers Covered by a Collective Agreement, 1997 and 2001

Figure 13.2 – Effects of Demand Growth and Wage Elasticity of Demand on the Market Constraints Faced by Unions

Simple union model-4 assumptions DL known Layoffs based on seniority—LIFO Ui = f(Yi)---self-interest Wage policy is determined by majority vote. What happens? Simple model leads to problems.

Figure 13.3 – Union Maximizes Utility Subject to the Constraint of the Labour Demand Curve: Monopoly Union

Maximize TWB and Max.Rent TWB= W*N Economic Rent R=W-OC These are special cases of the indifference curve approach. Here, U=f(TWB) OR U=f(∑Rents) With TWB, equilibrium is where ED=1.MD=0 With Rent max. equilibrium is at MD=OC

Union Wage Rigidity Cartter developed a union WPP Points of tangency of DL and indifference curves. Kink at existing wage makes WPP asymmetrical Assumed shape of indifference curves provides the Cartter result.

Who gets the monopoly rents? Craft versus industrial unions-entry restricting vs. wage-setting. Both generate a queue-excess supply—who is chosen? Could be random or there could be favouritism. Use market-taxi medallions. http://freakonomics.blogs.nytimes.com/2009/11/05/unfree-enterprise/

Monopoly Union Model Max. TWB, Max Rents and Max. u=f(W,N) are all variants on the monopoly union model. In this model, unions maximize subject to the constraint of the employer’s labour demand curve. In response to ∆W, employers are free to lay off workers The efficient contracts approach focuses on bargaining about both W&N

Figure 13.4 – Employer Isoprofit Curves

Figure 13.5 – The Contract Curve–-The Locus of Efficient Contracts

Rees model-misallocation costs http://www.jstor.org/pss/724852 Rees reference-need to access through library website or go to hard copy in library. Unions distort the allocation of labour resource and generate a deadweight loss. Rees estimates how large this is.

Figure 13.6 – The Demand for and Supply of Unionization

Figure 13.7 – Union Membership as a Proportion of All Workers, Canada and United States, 1980-1997

Figure 13.8 – Work Stoppages in Canada, 1901-2000 –peaks with inflation

Figure 13.9 – Hicks’s Bargaining Model and Expected Strike Length

Figure 13.10 – Spillover Effects of Unions on Wages and Employment

Figure 13.11 – Threat Effects of Unions on Wages and Employment in Nonunion Sector

Table 13A. 1 – Percentage of U. S Table 13A.1 – Percentage of U.S. Wage and Salary Workers Who Are Union Members, by Selected Characteristics, 2000