Reducing the Power of Labor Unions
What is a flexible labour market?
the ability of firms to hire, fire, and match workers to the skills needed for production
What are unemployment benefits designed to support when a person is out of work?
To provide income support and maintain living standards.
Abolishing minimum wages will decrease wages and ____ production costs for the firms
decrease/reduce
How can reducing union power affect wage negotiations?
It allows firms more control over wage-setting, potentially lowering labour costs.
Why might high unemployment benefits reduce the incentive for individuals to find a job?
They reduce the financial pressure to find work.
A minimum wage set above the equilibrium wage can create this outcome in the labour market.
Unemployment
Reducing union power may help lower this type of unemployment caused by wages being kept above the equilibrium level.
Structural/Real-wage Unemployment
Generous unemployment benefits can increase this type of unemployment by reducing the urgency to find work.
Frictional Unemployment
Abolishing the minimum wage allows wages to be determined by these two market forces.
demand and supply
What laws may governments implement to reduce the power of labor unions?
Laws limiting collective bargaining, strike actions, or mandatory union membership.
What laws may governments implement to reduce the power of labor unions.
Laws may include categorising some workers as 'essential' and thereby prohibiting them from going on strike. Alternatively, governments might regulate minimum wages or working conditions to take away the need for industrial action.
What is one argument in favour of abolishing minimum wages?
It can increase employment opportunities, especially for low-skilled workers.
Explain how reducing the power of labor unions can increase labour market flexibility and reduce real wage unemployment.
It allows wages to adjust more freely to market conditions, helping firms hire more workers and reducing unemployment caused by wages being kept above equilibrium.
Explain how reducing unemployment benefits can increase labour market efficiency and reduce structural unemployment.
More job-seeking reduces mismatches and improves efficiency.
Critics argue that abolishing minimum wages may increase employment but reduce this for low-skilled workers.
What is standard of living / income security?