SummaryCh16 - S u m m ar y Unions affect the wages not only...

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Summary • Unions affect the wages not only of their members but also of nonunion workers, though in an inde- terminate fashion. Some workers who are dis- placed from the union sector because of the adverse employment effect of the union wage pre- mium go to the nonunion sector, with that supply spillover depressing nonunion wages. As well, the demand for nonunion labour may change, but in opposing ways. On the one hand, the demand for nonunion labour may decrease (and hence nonunion wages fall) to the extent that it is a com- plement to union labour. On the other hand, the demand for nonunion labour may increase (and hence nonunion wages rise) to the extent to which it is a substitute for the now higher-priced union labour. The wages of nonunion labour may also increase directly if employers raise their wages to reduce the threat of becoming unionized.Wages of nonunion labour can also be affected by legislative initiatives that are often supported by unions (e.g., minimum wages) or if employers try to restore old
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