Question

1.17 If one sector of the economy becomes unionized and there is a spill over effect, then

[1] Wages will increase in the non-unionized sector.

[2] Wages will decrease in the non-unionized sector.

[3] Wages may either increase or decrease in the non-unionized sector

[4] Wages will remain unchanged in the non-unionized sector.

[5] Wages will be higher in the non-unionized sector compared to the unionized sector

Answer 1

The spillover effect refers to the decline in nonunion wages that results from displaced union workers supplying their services in nonunion labor markets.

If one sector of the economy becomes unionized and there is a spill over effect, then wages will decrease in the non-unionized sector.

So, the correct answer is [2].