Principles of Economics- Mankiw (5th) 575

Principles of Economics- Mankiw (5th) 575 - CHAPTER 26 U N...

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CHAPTER 26 UNEMPLOYMENT AND ITS NATURAL RATE 593 unions, unions played a much larger role in the U.S. labor market in the past. In the 1940s and 1950s, when unions were at their peak, about a third of the U.S. labor force was unionized. Moreover, unions continue to play a large role in many European countries. In Sweden and Denmark, for instance, more than three- fourths of workers belong to unions. THE ECONOMICS OF UNIONS A union is a type of cartel. Like any cartel, a union is a group of sellers acting to- gether in the hope of exerting their joint market power. Most workers in the U.S. economy discuss their wages, benefits, and working conditions with their em- ployers as individuals. By contrast, workers in a union do so as a group. The process by which unions and firms agree on the terms of employment is called col- lective bargaining. When a union bargains with a firm, it asks for higher wages, better benefits, and better working conditions than the firm would offer in the absence of a union. If the union and the firm do not reach agreement, the union can organize a with-
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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