83.1k views
0 votes
What happens in the labor market when a labor union has market power?

User BBog
by
8.1k points

1 Answer

5 votes

Final answer:

When a labor union with market power negotiates in the labor market, it can secure higher wages and benefits for its members, but may also result in employers hiring fewer union workers. In a bilateral monopoly situation, where a union meets a monopsony, the labor outcomes are less predictable and depend on the parties' bargaining power. Factors like globalization and legislation have influenced union membership and market dynamics.

Step-by-step explanation:

When a labor union, which represents workers, holds market power in negotiations with employers, the labor market experiences a shift from what might occur in a competitive market. The labor union's primary goal is to negotiate better pay, benefits, and working conditions for its members. When the union has significant market power, it can secure higher wages for union workers compared to non-union workers with similar education and experience. However, this could lead to employers potentially hiring fewer union workers to offset the higher costs.

If a labor union with market power encounters a monopsony, an employer with market power in hiring, economists refer to this situation as a bilateral monopoly. The outcome of negotiations in a bilateral monopoly is less predictable and depends on the relative bargaining power of the union and the monopsonistic employer. However, it often leads to higher wages and better employment conditions than what monopsonist employers might offer in the absence of a powerful union.

Overall, falling union membership due to globalization, shifts in industry, and changes in legislation has impacted the traditional labor market dynamics, leading to an overall decrease in union influence in some sectors.

User Ivelisa
by
8.9k points

No related questions found