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Chapter 25 econ - CHAPTER 27 Wages Unions and Labor Chapter...

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CHAPTER 27 Wages, Unions, and Labor Chapter 26 introduced students to the labor market, the factors that affect the supply of and demand for labor, and how the equilibrium wage and level of employment are determined in a perfectly competitive labor market. Chapter 27 examines a significant “barrier” to competition in the labor market: labor unions. The chapter begins with a description of the various types of labor unions. We then turn to a more theoretical analysis, looking at the possible objectives of labor unions and the various methods they may employ to pursue those objectives. Finally, we assess the possible effects of unionization—both “good” and “bad”—on union members, nonunion workers, the labor market, and the economy as a whole. CHAPTER OBJECTIVES Upon completing this chapter, your students should be able to: 1. Identify the objectives of labor unions. 2. Explain how labor unions try to influence the wage-employment tradeoff. 3. Explain how labor unions try to affect the demand for and supply of union labor. 4. Discuss how a labor union that faces a monopsony buyer can both raise wages and employment too. 5. Explain how unions affect wages and prices. KEY TERMS craft (trade) union union shop industrial union collective bargaining public employee union • strike employee association • monopsony closed shop CHAPTER OUTLINE I.THE FACTS AND FIGURES OF LABOR UNIONS A.Types of Labor Unions —Economists often distinguish between three types of labor unions: craft (trade) unions, industrial unions, and public employee unions. In addition, we include employee associations in our discussion. 1.Craft or Trade Union —a union whose membership is made up of individuals who practice the same craft or trade, such as the plumbers’ or musicians’ unions. 7
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8 Chapter 27 2.Industrial Union —a union whose membership is made up of workers who work for the same firm or in the same industry, but do not necessarily practice the same trade. Examples include the UAW (auto workers) and UMW (mine workers). For an industrial union to be successful, it must unionize all firms in the industry; otherwise, nonunion firms and workers will compete with union firms and workers. 3.Public Employee Union —a union whose membership is made up of local, state, and/or federal government employees, such as teachers’ and police unions. 4.Employee Association —an organization whose members belong to a particular profession and band together to promote that profession, such as the American Bar Association or the American Medical Association. B.A Few Facts and Figures —Union membership as a percentage of the labor force rose from 5.6 percent in 1910 to a peak of 25 percent in the mid-1950s. In 2001, membership was down to 13.5 percent.
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