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5 - 5 Contrasting labour union laws In Mo provlnos Consider...

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Unformatted text preview: 5. Contrasting labour union laws In Mo provlnos Consider two provlnoes that adopt different laws oancernlng labour unions. The graph below shows the labour market in a provlnce in the East. lnltlallv, the market-deanng wage there Is :6 per hour‘ Suppose that the Ieglslature In this Eastern provlnoe passes laws that make It easy for workers to joln a unloni Through collective bargaining, the unlon negotiates a wage of $7 per hour. Use the red point (cross symbol) to show how many union workers will be employed at the $7 wage. Dashed drop lines will automatlmlly extend to both axes. Miner WAGE [Dollarsl WAGE (Dollars! 12 Viefifi 1zfifi~fi~fi~fiif~fi 1D D A 8 12 1.5 an 2‘ 0 a B 12 I6 20 2A nuammr or uoaun lMillions ofworliers] @ fl oumrm DF mooun IMillions olwnrkers] Emllnltlon: Bun v The graph below shows the labour market In a province in the West. The leglslature In this provlnoe passes strong “right to work” laws that make It very dlfflwlt for unions to orpanlze workers, so the wage Is always equal to the market-clearing value. Except for thls dlfierence in Ieglslatlol'l, the two provlnces are very slrnllar. The Inltial position of the graph corresponds bo the initial labour market oondltlon In the Wesbern provlnoe before the HBWé‘veE‘Wfi'a‘firfoe‘Edn‘frfilTn‘pTaEfEfie‘fibcTflF mafiat‘firflfifima‘fiarb‘eh‘me to reach Its equlllbrlurn. (Note: Eoonon'lis’es all a mlnlmum wage that prevents. the labour market from read-llng equlllbrlum a blndlno mlnlmum wage.) In this particular case, the rnlnlmum wage of $3 per hour will J prevent the market from reachan the equilibrium you found above and will if contribute to prolonged unemployment, Enlonntlon: on“ v The minimum wage causes structural J unemployment. Explonntlon: op-n v ...
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