1. Modern Labour Economics
Chapter 13
Unions and the Labour Market

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

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

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

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

6. 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.

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

8. 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

9. 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.

10. 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.

11. 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

12. Figure 13.4 – Employer Isoprofit Curves

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

14. Rees model-misallocation costs
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.

15. Figure 13.6 – The Demand for and Supply of Unionization

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

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

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

19. Figure 13.10 – Spillover Effects of Unions on Wages and Employment

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

21. 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