merged

Example 3B: To increase product demand, a union of widget workers would support legislation
restricting imported widgets, or might launch a public relations campaign urging consumers to buy
“American-made” or “union-made” widgets. A union of public school teachers would support a
move from half-day to full-day kindergarten.
b. Increasing the MPP of union workers. An increase in labor productivity (MPP) will
increase the MRP of the labor, shifting the labor demand curve to the right (see Chapter
24).
Example 3C: To increase the MPP of union workers, a union of widget workers might negotiate
for worker training programs paid for by the employer. Or a union might simply negotiate higher
wages which would encourage their employer to invest in more capital. The increased amount of
capital would increase the MPP of the union workers.
c. Increasing the prices of substitute factors. An increase in the price of a substitute factor
for union labor would increase the demand for union labor.
Example 3D: To increase the price of a substitute factor, a union of widget workers would
support legislation increasing the minimum wage, or restricting the outsourcing of jobs to foreign
countries, or imposing a global minimum wage.
3. Decrease the supply of union labor. A decrease in labor supply will lead to a higher
equilibrium wage rate. The ideal situation to allow a union to control the supply of labor is a
closed shop agreement with the employer.
Closed shop – requires union membership as a condition for employment.
A closed shop agreement would give a union the ability to restrict the supply of labor
available by simply not admitting new members to the union. As discussed below, closed shop
agreements are illegal. But most states allow for an alternative called a union shop agreement.
Union shop – requires employees to join the union within a specified time.
A union shop agreement ensures that all eligible workers will be union members. This
increases the union’s bargaining power. A threat of a strike is more convincing when there is
100 percent union membership. As discussed below, union shops are illegal in some states.
The Taft-Hartley Act (1947) prohibited closed shop agreements in all states. The Act also gave
the individual states the power to pass right-to-work laws. Right-to-work laws prohibit union
shops. In the twenty-four states that have enacted right-to-work laws, every shop must be an
open shop. In open shops, workers may join the union or may choose to not join the union.
Workers who choose to not join the union are still covered by the collective bargaining
agreement. The more workers who choose to not join the union, the weaker is the union’s
bargaining power. The most recent state to pass right-to-work was Michigan, in 2012.
Collective Bargaining
Collective bargaining is where a union bargains with management on behalf of the workers. The
union, as a type of labor monopoly or cartel, will have more bargaining power than the individual
workers would have. A union has market power and can directly affect the wage rate through
collective bargaining.
The most important bargaining tool available to a union is the threat of a strike. A union might use
the threat of a strike to negotiate a wage rate above equilibrium.
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Labor Unions 25 - 4