Question

• Describe labor and other resource markets. How is the market for labor similar to and different from the markets for steel or other factors of production? What can a firm do to ensure a dependable supply of these resources?
• Look up the concept of a spillover effect and explain how unions have benefited workers who have never been a member of a union.
• Union membership for non-government workers has fallen dramatically over the last 30 years, yet government workers are becoming ever more and more unionized. Why do you think that is true?
• Would you expect the presence of labor unions to lead to higher or lower pay for worker-members, both in the short and long run?
• Would you expect a higher or lower quantity of workers hired by those employers? What effect would you expect this to have on a company's bottom line? As a union member, would you accept higher pay if you knew that would result in layoffs? Explain briefly.
• Will union membership continue to decline? Why or why not?

Answer 1

Labor markets are same as other resource markets wherein they provide the availability of labour in terms of demand and supply. The wages are determined in the similar manner with other resources.

Labor market is similar to other factors of production in terms of supply of labor. Labour as resource is supplied and priced efficiently. However labor unions can demand a higher wage even if the wage is not the equilibrium one, resources don't have that sort of pricing power.

Firms can ensure a stable supply of goods and resources which are efficiently priced and supplied as per the demand scenarios.

Spill over effect arises when one phenomenon spreads rapidly impacting every individual, in this case labor unions demand a higher wage for a particular industry, in this manner even if a labourer is not part of the union, he gets benefited in terms of the higher wage as his co-workers are paid the same amount.

Government often heeds to the mass needs and their demands are met if not to the full extent, but partially. This creates a safety net for government employees and they are often on permanent basis, they often stay lifelong long, being a part of the union increases their bargaining power.

Labor unions were formed because employees were discriminated and often paid suboptimal wages. Thus labor unions will ensure employees are paid higher wage or the efficient wage which is to be allocated in the short and long run.

Employers would hire workers who are productive and also hire if there are stringent regulations in the market. If there is an unorganized market which has cheap employees, it would hire them at a cheaper rate, there might be a chance that they are unskilled, if there is requirement of skilled demand than employers would resort to labor unions. Company's bottom line will significantly improve if they hire workers who are at a cheaper rate, while it's bottom line would be lower if they hire employees who are at a higher rate.

As a union member, I would first analyse whether the company is seriously not that profitable and based on accounts, will decide to lower the wage as per analysis as reduction in wages is better than layoffs, where the worker won't have any earning power.

As markets become regulated and unskilled jobs are replaced by technology and artificial intelligence, union membership will continue to decline as the demand is reducing and skilled jobs end up getting paid a higher wage which is as per market standards and governments are also ensuring minimum wages which ensures workers are remunerated efficiently and not discriminated.