6.5 The Influence of Trade Unions in Determining Wages and Levels of Employment

How do trade unions influence wages and employment

Trade unions negotiate for higher wages and better working conditions, which can lead to higher wages but may reduce employment if firms cannot afford the higher costs

What factors affect the ability of trade unions to influence wages

• Elasticity of demand for the product

• The proportion of unionised workers in the industry

• The strength and unity of the union

• The economic condition of the industry

What is the impact of trade unions on employments levels in competitive markets

In competitive markets, trade unions can drive wages above equilibrium levels, which may lead to unemployment if employers reduce hiring due to increased labour costs.

What is the impact of trade unions on employment levels in a monopsony labour market

In a monopsony labour market, trade unions can negotiate higher wages and better working conditions, which may lead to increased employment levels as employers differentiate their offers to attract workers.