Question

2. Explain three basic strategies unions use to raise wages.  

            NOTE: In Q2, you MUST explain them. Don’t just list them.

Answer 1

Supply Restrictions:

The best way to increase pay is to restrict open labor supply. And if a union can effectively increased the supply of labor, it would inevitably result in higher wage rates. Trade unions may adopt different practices to limit labor supply to different occupations and jobs such as licensing requirements, long apprenticeship programs, immigration barriers, high initiation fees, refusal to admit new members to the union, and prohibition of non-union workers from holding jobs.

Bargaining Power:

The second approach to increase wages is by using collective bargaining power. If labor unions have ample economic leverage a strike may often stop the flow of output by only a very limited number of critical employees. For instance, an airline mechanics sudden work stoppage may force major airlines to cancel their flights. Since the mechanics serve a strategic role, an airline can not operate without their services even though they make up just 10 percent of all employees of the airline.

Increase in Demand:

The demand for labor service in a unionized industry is dictated by factors outside the union's direct control, such as the availability of sub-institutional inputs and the company's demand for the commodity. If trade unions may enforce greater restraint on others, however, the productivity of labour would increase.