Question

Managers at Acme Accessories are talking with employee union representatives during the collective bargaining process. During the negotiation discussions for employee salaries, the managers offered to increase the starting wage of Tech Level 1 employees to $10.15 per hour. The union originally asked for a wage of $11.25. Eventually they agreed upon a wage of $10.60. Although neither side revealed their hand to the other party, management was actually willing to go up to a maximum of $10.80 and the union was actually willing to settle as low as $10.30.

In this situation, $10.15 is:
a. In the manager’s expected range of desired results
b. In the union’s expected range of desired results
c. In the manager’s preferred range of results
d. In the union’s preferred range of results

Answer 1

In the collective bargaining process, a compromise wage of $10.60 was reached between managers and the union, falling within the union's acceptable and preferred wage range. The firm may respond to higher wages by investing in machinery, increasing productivity but potentially decreasing the number of employees needed.

Step-by-step explanation:

The collective bargaining process between managers at Acme Accessories and their employee union resulted in the wage for Tech Level 1 employees being set at $10.60 per hour, which was within the union's acceptable range of outcomes. The negotiation outcome was a compromise between the union's initial request of $11.25 and the company's offer of $10.15.

The finalized wage was not only within the union's expected range ($10.30 to $11.25) but also within its preferred range, as the union was willing to go as low as $10.30. The table showing the consequences of raising wages illustrates the impact on the company's hiring decisions and its inclination toward capital investment over labor when wages increase, such as economizing on labor hours and utilizing machines which may lead to lower employment levels. This demonstrates a fundamental principle in labor economics, where higher wages can drive technological adoption but possibly at the cost of reduced labor demand.