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Modern Labour Economics

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.

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Modern Labour Economics

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  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, 1921-2002

  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. • http://freakonomics.blogs.nytimes.com/2009/11/05/unfree-enterprise/

  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 • 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.

  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. Wage and Salary Workers Who Are Union Members, by Selected Characteristics, 2000

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