ECON 306 Lecture Notes - Lecture 20: Industrial Unionism, Budget Constraint
24 May 2017
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Document Summary
Union/membership utility is a positive function of wage rate and employment. In industrial union: unions want to improve wage and employment conditions. Union objective function: unions only care about employment and wage rates (not about non-wage benefits) Hours per worker is constant, so e = people employed. All people covered by the collective agreement are union members. Case a: collective agreement sets only the wage (and the firm sets employment) The firms demand for labour is a constraint on the union the union has no impact on. If the union choses w, the firm will chose the profit maximizing level of e. Therefore during negotiation, unions will consider the effect of wage on e. Dl curve act like a budget constraint on union. Industrial unions have both skilled and unskilled workers, with different alternative employment opportunities. Older workers may place more emphasis on pension plans/deffered compensation rather than current wage rates. Median voter model (the preferences of the average member).
