3. Trade Unions and National Minimum Wage

What are Trade Unions

An organisation of lots of different workers that bargain especiallly for higher wages and better working conditions

Collective Bargaining

Where members of a trade union can collective come together to bargain for higher wages and better working conditions on behalf of all workers

Trade Union Diagram (Competitive Market)

Trade Union Diagram (Monopsonistic Market)

Evaluation of Trade Unions

TU’s may deliver better outcomes in a monopsony labour market

Strength of Trade Union Power (Trade Union Density)

Success determined by Union Mark Up

Evidence to show decling power of trade unions (also counts as evaluation)

Strict Legislation - ‘Closed Shop’ TU’s are now illegal, more strick striking conditions (at least 75% need to agree, can only strike against your own employer)

Restructuring of the UK Economy - Secondary to Tertiary Sector + Individuals working for a range of employers

Competitive Pressures - Firms can reject trade unions knowing that they can loose competitiveness (due to higher costs)

What is Trade Union Density

The proprtion of workers in a given profession that are part of a given trade union

What is Union Mark Up

The difference in wages earned by individuals in a given profession also part of a given trade union compared to workers in a similar profession but not part of a given trade union

National Minimum Wage Diagrams (Both Competitive and Monopsonistic Markets)

Advantages of National Minimum Wage

Poverty Alleviation

Reduce Wage Differentials

Incentive to Work

Fiscal Benefit to the Government

Increases Productivity (morale boost)

Incentive for Firms to Boost Human Capital

Counter Monopsonist Employer

Disadvantages of National Minimum Wage

Unemployment (but elasticity can reduce the amount of unemployment)

Youth lose out the most (low MRP’s)

Those not on NMW may ask for higher wages to maintain the wage differential

Costs to businesses (shutting down and lack of competitiveness)

Regional Differences (is the NMW the same across the whole country, can be bad due to different cost of livings in different areas)

Hit to governemnt finances given state employment