Final answer:
The idea that unions do not have upper limits in wage negotiations is false. Unions consider economic outcomes and set realistic bargaining ranges to benefit their members and sustain the industry.
Step-by-step explanation:
The statement that unions do not place upper limits on their bargaining ranges is false. Unions are strategic entities that recognize the importance of setting a realistic bargaining range to ensure successful negotiation outcomes. In a scenario where all firms in an industry must negotiate with a single union, and hiring nonunion labor is not an option, the existence of a union alters the labor market dynamics. Without a union, market equilibrium would be established at the intersection of the demand for labor (‘D’) and the supply of labor (‘S’), setting an equilibrium wage (‘We’), as depicted in Figure 14.12. However, when a union is present and exercises its power to strike, it can negotiate a higher wage (‘Wu’) above the equilibrium wage, leading to an excess supply of labor for union jobs (‘Qs’).
Unions must consider the possible economic repercussions of demanding excessively high wages. Setting the wage too high might force firms to cut jobs, leading to unemployment among union members, which contrasts with the union’s goals. Conversely, setting the wage marginally above the equilibrium wage might not significantly impact employment levels but would produce a smaller wage gain for union workers. Ultimately, the objectives of the union are to negotiate a fair union wage while avoiding job losses and ensuring the sustainability of the firms and the industry as a whole.