Labor Unions

Definition

Labor unions are organizations of workers who have come together to collectively bargain with employers over wages, benefits, and working conditions. They represent the collective interests of their members and seek to improve their economic and social status through collective action.

5 Must Know Facts For Your Next Test

1. Labor unions can influence the supply of labor in a market, leading to higher wages and potentially lower employment levels.
2. Unions can use their collective bargaining power to negotiate for better working conditions, job security, and benefits for their members.
3. The presence of unions can lead to a more equitable distribution of profits between workers and employers.
4. Unions can also engage in political advocacy to influence laws and regulations that affect workers' rights and workplace policies.
5. The decline of union membership in recent decades has been associated with a rise in income inequality and a shift in the balance of power between workers and employers.

Review Questions

• How do labor unions affect wages and employment in an imperfectly competitive labor market?
  • In an imperfectly competitive labor market, such as one with a monopsony employer, labor unions can use their collective bargaining power to negotiate higher wages for their members. This shifts the supply curve of labor to the left, resulting in a higher equilibrium wage and a lower level of employment. The presence of unions can thus lead to higher wages but potentially lower employment levels in the market.
• Explain how labor unions can exercise market power on the supply side of the labor market.
  • Labor unions represent the collective interests of their members and can use their bargaining power to influence the supply of labor in the market. By negotiating for higher wages, better benefits, and improved working conditions, unions can shift the supply curve of labor to the left, effectively reducing the number of workers willing to work at a given wage. This can give unions significant market power on the supply side, allowing them to drive up wages and shape the terms of employment for their members.
• Evaluate the potential impacts of labor unions on the overall efficiency and distribution of economic outcomes in the labor market.
  • The presence of labor unions can have both positive and negative impacts on the efficiency and distribution of economic outcomes in the labor market. On the one hand, unions can help to correct power imbalances between workers and employers, leading to a more equitable distribution of profits and improved working conditions. This can enhance social welfare and promote a more just economic system. However, the increased bargaining power of unions can also lead to higher wages and lower employment levels, potentially reducing overall market efficiency. Ultimately, the net impact of labor unions on the labor market depends on the specific context and the balance between the benefits they provide to workers and the costs they impose on employers and the broader economy.

Related terms

Collective Bargaining:

The process of negotiation between unions and employers to determine the terms and conditions of employment, including wages, benefits, and work rules.

Strikes: A work stoppage organized by a labor union to pressure an employer to meet the union's demands, often related to wages, benefits, or working conditions.

Closed Shop:

A workplace where the employer agrees to hire only union members, and employees must join the union as a condition of employment.