Problems with the analysis of a competitive labour market Supply side Trade Unions - Organisations of workers who group together to further their own interests - Greater bargaining power (e.g. for wages) - Wage levels, working conditions, job security etc. · Closed shop; - Workers weren't allowed in certain industries if they weren't in a union (this is not the case nowadays) - Economic analysis however assumes this - The closed shop (union) is the monopoly supplier of labour · Union density; - % of workforce that is unionised - The higher the density, the more control the union has over the labour supply · Union "mark-up"; - Keeps wages higher than the level they would be in a competitive market (level above the equilibrium) - Tends to be cyclical - Measure of success of a union · To show the effect of union entry into a previously competitive market, you can use a diagram; W S = AC W2 W1 Q2 Q1 Q3 D QL The wage rate rises from W1 to W2, pushing Q1 down to Q2; this could leave some unemployed, but those employed earn more as the union refuses to supply below W2. www.economicshelp.org . However, the extent of unemployment would depend on how elastic demand is for labour in a specific industry, e.g. Doctors or Teachers may have inelastic demand while shop assistants may be more inelastic Government policy on Trade Unions · Conservative Gov. of 79-97; - During 80s, one supply-side policy was to reduce union power - Aimed at making the labour market more flexible - In particular regarding wages, unions prevent wages acting as a signal to efficient allocation of labour resources · This Government; - Made closed-shop illegal - Outlaw of secondary picketing - Secret ballot must be held before lawful strike action · The results of this were;
- Union membership reduced - Reduction in mark-up - Reduction in union density - Fewer industrial disputes Chart 1.1: Trade union membership levels in UK from 1892 to 2015 Trade Union Density % by Industry 14,000 12,000 10,000 8,000 6,000 4,000 2,000 D 1892 - 1895 1898 1901 1904 1907 1910 1913 1916- 1919 : 1922 192 5 1928 1931 1934 1937 1940 1943 1946 1949 1952 1958 1955 1961 1964 1967 1970 1973 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 -Historic/Certification Officer data -Trade union members that are employees, UK Public administration and defence Education 53.4 51.5 Electricity, gas, steam & air con. Human health & social work Transport and storage Water supply, sewerage, waste Mining & quarrying Manufacturing 43.2 41.4 38.9 28.7 23.5 187 Financial & insurance activities 16.7 Construction Other services 13.6 14.8 Real estate activities 12.8 Wholesale, retail and moter repair Information & communication Professional & admin, services 11.9 11.7 10.4 Accommodation & food service Agriculture, forestry & fishing 3.6 8.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 · Other possible reasons for this however could be; - Increasing product market