Question

Explain how unions can affect efficiency through the Screening model.

Answer 1

Ans.

1. Restrictive Work Rules ­:- One of the most common ways that unions reduce efficieny is to negotiate contract rules that restrict management's ability to organize work activity. Unions impose jurisdictional restrictions on the kinds of jobs workers may perform. Unions generally insist that workers should be promoted in according to the seniority rather than ability and efficiency.
2. 
   
3. Strikes :- Strikes are rare and moreover associated total economic losses are relatively minimal. On the one hand, employers in the struck industry may have forecast the strike and worked their labor force overtime to collect inventories to supply customers during the strike period, so that the work lost data overplay the actual loss. On the other hand, the amount lost can be underplay by the data if production in associated industries ( those that buy inputs from the struck industry or sell products to it) is disrupted. As a broad generalization, the bad effects of a strike on nonstriking firms and customers are likely to be higher when services are involved and less when products are involved. Remember, that strikes are the result of the failure of both parties to the negotiation, so it is inaccurate to attribute all of the costs associated with a strike to labor alone.
4. 
   
5. Wage Advantage and Labor Misallocation ­:- Union achieved higher wages can cause a displacement of labor with reduces the wage in nonunion sectors of the economy. This movement of labor causes total output to fall as workers were more productive in their previous jobs that they are in the jobs in the nonunion sector that they are forced to migrate to.