Unionized and Non-Unionized Workers
- 1. Unionized and Non- Unionized Workers EFFECT ON FIRM’S HIRING DECISIONS Presented By- Nakul Gupta BBE/19/5 Hemant Kumar BBE/19/45 Muskan Maurya BBE/19/55 Megha Kapoor BBE/19/33
- 2. What is a Union ? A union is a workers' organization which represents its members and which aims to improve things such as their working conditions and pay. Benefits of Belonging to a Union • Pay and wages • Work hours • Benefits - including retirement plans, health insurance, vacation and sick leave, tuition reimbursement, etc. • Working conditions • Workplace health and safety • Ways to balance work and family • The best ways to get work completed, and other work-related issues
- 5. The most important example of monopoly power in factor markets involves labor unions. Factor Markets with Monopoly Power Just as buyers of inputs can have monopsony power, sellers of inputs can have monopoly power.
- 6. Wage Discrimination in Unionized and Nonunionized Sectors Number of Workers Wage per worker DU DNU DL SL w* U L wU When a monopolistic union raises the wage rate in the unionized sector of the economy from w* to wU, employment in that sector falls. For the total supply of labor to remain unchanged, the wage in the nonunionized sector must fall from w* to wNU.. MU L wNU
- 7. Wage Discrimination in Unionized and Nonunionized Sectors Firms hire more non- unionized workers at lower wage rate but hire less unionized workers at higher wage rate. ATwo-Sector Model of Labor Employment from the firms. Union monopoly power impacts the non- unionized part of the economy.
- 8. Consequences and effects of Two sector employment in real life
- 9. Declining of Job opportunities for Union workers • As we learned earlier ,due to higher wages of union workers than the non-union workers. • Factories and industries in the manufacturing sector hire less number of union workers gradually as the years go on. • Job opportunities for the non-union workers have been almost the same from 1977 to 2010. • Due to this , we see decline in number of union membership.
- 10. Decline in the rate of union members
- 11. Rise in the Job opportunities of the Non-union workers • Due to the declining job opportunities for the Union workers due to their high wage demand from the firms. • Low wage demand tempt firms and factories to hire Non-Union workers. • Decrease in the number of union members over time due to less demand of Union workers
- 12. Factor Markets with Monopoly Power • Bilateral Monopoly • Market in which a monopolist union sells to a monopsonist firm. • Observations • Hiring without union monopoly power • MRP = ME at 20 workers and w = $10/hr • Union’s objective • MR = MC at 25 workers and w = $19/hr Number of Workers Wage per worker DL = MRPL MR 5 10 15 20 25 10 20 40 SL = AE ME 25 19 Wage Possibilities wC
- 13. Who Will Win? The union will if its threat to strike is credible. The firm will if its threat to hire non-union workers is credible. If both make credible threats the wage will be at wc.
- 14. Teenage Labor Markets and the Minimum Wage • When the minimum wage rose in New Jersey in 1992 from $4.25 to $5.05, a survey conducted found a 13% increase in employment. • Explanations • Reduction in fringe benefits • Lower pay for more productive workers • Monopsony market
- 15. Wage Inequality-Have Computers Changed the Labor Market? • 1950 - 1980 • Relative wage of college graduates to high-school graduates hardly changed • 1980-1995 • The relative wage grew rapidly • In 1984, 25.1% of all workers used computers • 1993 -- 46.6% • 1999 -- nearly 60%
- 16. Wage Inequality-Have Computers Changed the Labor Market? • Percent change in use of computers • College degrees • 1984 - 1993 -- 42 to 70% • Less than high school degree • 5 to 10% • With high school degree • 19 to 35%
- 17. Wage Inequality-Have Computers Changed the Labor Market? • Growth in wages -- 1983 - 1994 • College graduates using computers - 11% • Non-computer users -- less than 4% • 1993 - 1997 • High school dropouts out of school less than 10 years earned 29% less than high school graduates • 1963 -- The differential was only 19% • 1993 - 1997 • Average weekly wage for college graduates (out of school less than 10 years) was 96% higher than high school graduates. • College graduation premium has more than doubled.
- 18. THANK YOU!