Answer to Question #316143 in Microeconomics for Jan

Question

Show with empirical evidence the impact of trade unions on employment

Answer 1

Unions have been credited with delivering improvements in working conditions and wages since the Industrial Revolution. In the manufacturing and resource industries, such as steel mills, textile factories, and mines, many unions were created. However, unions have spread to other industries over time(Radcliffe, 2021). The two main methods of influence used by labor unions are limiting labor supply and increasing labor demand. Unions negotiate the wages that companies will pay through collective bargaining. Employers may require fewer hours if unions demand a higher wage than the equilibrium wage (determined at the convergence of the labor supply and labor demand curves). Because a higher wage rate correlates to less effort per dollar, unions frequently have difficulty obtaining higher rates and instead focus on raising labor demand. Unions can improve labor demand and consequently pay by employing a variety of strategies.

In 1998, trade unions kept raising compensation in the private sector, keeping it above comparable non-union workplaces. Despite their weaker position in comparison to prior periods, this was the case. However, the effect was not widespread. It was only applicable in two situations. Multi-union representation was one of them. The other was in situations when pay-setting arrangements encompassed at least 70% of employees in the workplace. This situation affects nearly half of all employees covered by collective bargaining agreements, or about 15% of all private-sector workers. In most cases, their salary was 9% greater than that of equivalent employees in non-union businesses(Millward et al., 2017).

References

Millward, N., Forth, J., & Bryson, A. (2017, December 28). The impact of trade unions on jobs and pay. JRF. https://www.jrf.org.uk/report/impact-trade-unions-jobs-and-pay

Radcliffe, R. (2021, June 22). Unions: Do they help or hurt workers? Investopedia. https://www.investopedia.com/articles/economics/09/unions-workers.asp