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are150-2review-questions-2-answers - University of...

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University of California, Davis Department of Agricultural and Resource Economics ARE 150 Fall 2010 Philip Martin Dist 9/30/10 [email protected] Due 10/14/10 Answers to Review Questions 2 Please type or write neatly, and put your discussion section, 4-5 or 5-6, on your answers. Each answer is worth one point. 1. A. The exit response to work place dissatisfaction is to quit, as assumed in microeconomic theory, where there is no unemployment and job changes are costless. Employer personnel policies that focus on replacing exiting workers, as in fast food and agriculture, offer a wage and benefit package that is mostly wages to generally younger workers without firm-specific training. Workers who quit for higher wages are usually replaced with similar young and mobile workers. The collective voice response to workplace dis-satisfaction is a union response, an effort by especially older workers with firm-specific training (training often results in higher wages) to collectively change “bad” aspects of the work place by organizing and bargaining with the employer. Employer personnel policies in collective voice or unionized firms usually include more fringe benefits for two reasons: (1) fringe benefits are more valuable to the older employees who dominate union leadership and (2) employers want to retain older employees who have firm-specific skills that would be hard to replace. 2. The major ways to deal with workplace conflicts between employers and employees, which the Wisconsin school considers inevitable, are: - employers unilaterally making decisions about wages and working conditions--the employment at-will doctrine. Dis-satisfied workers quit or are fired. - government-set wages and work rules, with government (1) owning all production as in communism OR (2) allowing private ownership, but regulating wages and working conditions (regulated market economy) and - collective bargaining , under which government sets the rules for unions and employers, but allows them to negotiate a 2-3-4 year agreement setting wages, work rules etc. The US in the 1935 NLRA, and CA in the 1975 ALRA, made collective bargaining the preferred way to resolve labor market conflict. The trend over the past three decades has been for collective bargaining to decrease and government regulation of the labor market to increase. 3. The two faces of unions are monopoly and collective voice (Freeman- Medoff). Examples of the monopoly face are:
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1. Unions raise wages above competitive levels for some workers at the expense of others, and these higher union wages encourage unionized firms to use too much capital and thus reduce employment in unionized sectors. In a full- employment economy, extra workers not hired by unionized firms are pushed into the nonunion sector at lower wages.
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