Economics Midterm Guide PDF

**ECON MIDTERM GUIDE** ====================== **QUESTION \#1** - [What is a Labour Union? ] - A labour organization - Seeks to improve the well-being of its members - Job security - Better pay - Better benefits - [What is an Industrial Union? ]...

**ECON MIDTERM GUIDE** ====================== **QUESTION \#1** - [What is a Labour Union? ] - A labour organization - Seeks to improve the well-being of its members - Job security - Better pay - Better benefits - [What is an Industrial Union? ] - Arose in the response of the changing nature of the workplace - Following the industrial revolution - Move away from working with things and now working in the service sector - Industrial sector Service sector - Sought to improve wages and working conditions through the collective action by both skilled and unskilled labour - Change of working conditions - Change to wage matching the labour/work done - [Economic Factors ] - Increased exploitation of workers - Minimal job security/support after injury or illness - Craft Union - Origins in the medieval craft - Tried to prevent new-comers with the same skills from undercutting their prices - Focused more on price and wages - [What is Collective Bargaining? ] - Workers attempt to improve their wages + working conditions - They're doing this as a collective/group rather than individual action - More likely to prove their point that way bc they have more ppl backing them - [What is Collective Bargaining meant to Accomplish?] - Better wages - Better working conditions - Job security - Protection from arbitrary treatment - Can't just fire you one morning - [Evolution of Collective Bargaining ] - **Pre-industrial Revolution** - Unions seen as contrary to competition - Organization of workers was discouraged - Often illegal and seen as - Criminal Conspiracy Law - Anti-Trust Legislation - **Post-Industrial Revolution to WWII** - More of a neutral attitude - Unions are still pretty weak - **Post WWII** - Significant labour relations legislation was passed - More towards actively encouraging collective bargaining - [Why promote Minimum Wage Legislation?] - Reduces the potential of firms substituting non-union jobs for union jobs (having a tendency for substitution) - They can do this in 2 different ways - **Directly** -- Contracting them out - **Indirectly** -- Growth of non-union firms - By improving unions they seek to increase labours share of national income - Which is a greater bargaining power - It also sets a benchmark for wages - During negotiation you can ask for a higher wage than what minimum wage is - [Critical Examine of Unions ] - Unions may provide an outlet for workers through formalized grievance procedure - They can dispute resolution mechanisms - Reduce worker-to-worker and worker-to-management conflicts - Unions may counter monopsony power of employers + reduce inefficiency - Which improves the efficiency - Labour monopsonist has inefficiency associated with it **QUESTION \#2** - [Supply & Demand Framework of Union Representation] - **Supply** - Comes from union staff - Involves potential cost - Administrating contracts for existing members - Organizing new workplaces - Unions allocate resources to the activities with the greatest expected return - Smaller workplaces tend to not have unions bc they don't think it's worth their time/money - **Demand** - Comes from workers who weigh expected costs + benefits of being a part of a union - Potential Benefits include... - Higher wagers - Non-wage benefits - Job security - Protection from arbitrary - Potential Costs include... - Paying unions dues (direct) - Paying with their time (indirect) - Filling out a bunch of forms/paperwork - Lost income from... - Strike - Work stoppage - Walk outs - Costs associated with employer's actions meant to discourage the union organization - **There's some net benefit/cost** - [Equilibrium for Union Representation] - Determined by the interaction of supply & demand - **What determines the equilibrium?** - Quantity of representation at a point in time - **EXAMPLE** - If low demand is due to low benefit workers + low supply due to high organizational cost to union = firm not likely to be organized **QUESTION \#3** - Give explanation + draw a graph - [Craft Union ] - **EXPLANATION** - Union/Bargaining power is in [EXCLUSIVITY] - This raises union wage above the competitive equilibrium - Union limits the supply of labour and shifts to the supply of labour backward - By requiring long apprenticeships - **GRAPH** - - [Industrial Union ] - **EXPLANATION** - Union/Bargaining power is [INCLUSIVITY ] - Strike threat - Workers collectively negotiate a wage above the curve - Strength in numbers - Regardless of skilled or unskilled workers - **GRAPH** - - [Other Effects ] - In both types... - Fewer workers hired then in the competitive equilibrium - Deadweight loss in consumption + production - Loss of social welfare due to market disruption - We are not getting the most from our scarce resources - Transfer of total surplus - Transfer from firm to workers - Industrial unions - Face larger pools of less skilled workers - Since there's an excess supply of labour at minimum wage - Within employment there's also disemployment **QUESTION \#4** - [ How Can Unions Improve Worker Well-Being?] - **\*\*TALKING ABOUT WAGES\*\*** - Unions influence the demand for labour which is a derived demand - Derive from the demand for the production they produce - Sometimes unions will actively promote the productivity - Productivity of Labour - Unions promote/provide skills training and development - Often encourages firms to invest in machinery + equipment - Capital improvement improves marginal product of labour