1. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Labor Unions

2. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Labor Market Labor SUPPLY is the willingness and ability to work specific amounts of time at specific wage rates in a given time period.

3. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Labor Market The Labor DEMAND is the quantities of labor employers are willing and able to hire at alternative wage rates in a given time period.

4. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Competitive Equilibrium The equilibrium wage is the wage rate at which the quantity of labor supplied in a given time period equals the quantity of labor demanded. The intersection of labor-supply and labor-demand reveals the equilibrium wage.

5. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Quantity of Labor (hours per week) Wage Rate (dollars per hour) 0 Competitive Equilibrium in the Labor Market C Labor demand Competitive equilibrium Labor supply qeqe wewe

6. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Labor Unions An organization that represents workers. (Not managers, supervisors, or “bosses.”)

7. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Changing Unionization Rates

8. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Private vs. Public-Sector Trends In the last ten years, the unionization rate in the private sector has fallen from 11.5% to 8.2%. At the same time, union membership has increased among teachers, government workers, and nonprofit employees.

9. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Union Objectives To control labor by creating a monopoly Unions then can control –Wages –Working Conditions –Who is hired and fired

10. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Labor Unions Closed Shop - You must belong to a union to be hired. Agency Shop - You do not have to join the union but you must pay a fee to the union.

11. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Collective Bargaining Collective bargaining is direct negotiations between employers and unions to determine wages and working conditions for ALL workers.

12. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Productivity Unions affect prices indirectly, via changes in productivity. –Productivity – Output per unit of input, such as output per labor hour.

13. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Productivity Work rules may reduce productivity. –Limit the pace of production. –Restrict the type of jobs a particular individual can perform. – Require a minimum number of workers to accomplish a certain task.

14. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Pressure to Settle Labor and management both suffer from a strike or lockout – no matter who initiates the work stoppage. Because potential income losses are usually high, both labor and management try to avoid a strike or lockout if they can.