Question

Jonathan owns a shoe factory that produces flashy shoes, but he pays his workers the bare minimum wage so that he can live large. The workers at his factory, led by Cosku, have formed a union, and are threatening to go on strike unless they receive a higher wage so that they can reasonably support their families. Five years ago, when Jonathan hired most of the workers, unemployment was very high. Now, unemployment is very low. This has changed the relative bargaining power of the employers and the employees, which Cosku and Jonathan remember from when they took ECON 104. Which statement most accurately describes how their relative power now may affect the campaign for higher wages?a) Jonathan - the factory owner - has more bargaining power than before, because he knows they will be very grateful to him for hiring them when unemployment was high. He thinks he won't have to pay workers more.b) Cosku and the workers have higher bargaining power, because they are less replaceable due to unemployment. There are very few people who Jonathan can hire to replace the workers, and if there are no workers, Jonathan cannot continue to live large. Thus, the power dynamics of the situation favor the workers winning higher wages.c) Both parties are in a better position. If Jonathan gives workers a higher wage, it will cause inflation, and then he can charge more for the flashy shoes from his factory. Workers will make more, and so will Jonathan.d) Cosku and the workers are in a worse position because they already make minimum wage. The government will see their protests and think that it's silly, because they are already paid a legal wage.

Answer 1

b) Cosku and the workers have higher bargaining power..........dynamics of the situation favor the workers winning higher wages

Step-by-step explanation:

Labour markets wages & employment are determined on the basis of :- labour demand by firms & labour supply by workers ; and relative bargaining power of buyer firms & seller workers.

Firms more bargaining power leads to reducing pressure on wage rates with more employment. Workers more bargaining power leads to increasing pressure on wage rates with less employment.

At the time of Jonathan's shoe factory inception, more unemployment meant firms had more bargaining power & hence the wages were lower. However, no hike in wages with time make workers demand higher wage with strike warning. Meanwhile, less unemployed labour supply available implies that firms have no substitute labour to hire. So, union & workers have higher bargaining power & labour irreplaceability due to less unemployment - state that Jonathan has no other alternative than to accept labour favouring notion of higher wages.

Answer 2

b. Cosku and the workers have higher bargaining power, because they are less replaceable due to unemployment. There are very few people who Jonathan can hire to replace the workers, and if there are no workers, Jonathan cannot continue to live large Thus, the power dynamics of the situation favor the workers winning higher wages

Step-by-step explanation:

Since in the given question it is mentioned that the employees will go on strike until they do not received higher wages so that they can support their families

And in case of low unemployment, the relative bargaining power of the employers and the employees is changed i.e high. Moreover they are very Less person through which they can hire in order to replace the workers and in the case when there is no workers so he is unable to continue its business operations due to which he cannot live large.

So to overcome this he have to agree to pay the higher wages to the employees other wise the workers could leave the organization