Microeconomic Policy

Microeconomic Policy

A New Perspective

Clem Tisdell and Keith Hartley

This thoroughly accessible textbook shows students how microeconomic theory can be used and applied to major issues of public policy. In this way, it will improve their understanding of both microeconomic theory and policy and also develop their ability to critically assess them. Clem Tisdell and Keith Hartley have expanded upon their previous successful work on microeconomics. As a result, this new book is considerably updated with substantial chapter revisions, as well as new chapters dealing with business management, ownership, environmental issues, public choice, defence, conflict and terrorism.

Chapter 13: Trade Unions

Clem Tisdell and Keith Hartley

Subjects: economics and finance, industrial economics

Extract

INTRODUCTION: WHAT IS THE PROBLEM? Unions always arouse controversy. Critics point to union bargaining power, restrictive labour practices, overmanning, closed shops, strikes and picketing. Supporters stress their contribution to mitigating some of the less desirable aspects of free markets, such as monopsony, long hours of work, and dangerous working conditions (that is countervailing power). Marxists view wage levels as the outcome of a constant struggle between workers and capitalists (who are these groups?), with workers aiming to raise wages above the subsistence level and reduce the ‘surplus value’ accruing to capitalists. In fact, unions raise a set of microeconomic and public policy issues embracing efficiency in resource allocation and income distribution. Examples are: 1. The effects of unions on economic and technical efficiency. The popular belief is that unions adversely affect productivity and efficiency through restrictive practices, featherbedding, ‘make-work’, and barriers to labour mobility. Otherwise, if unions favourably affected productivity, there would be more instances of firms supporting the unionization of their workers. Unions viewed as monopolists, with monopoly power enabling them to set wages above the competitive level. The hypothesis is that unions influence relative wages in favour of their members. This raises the empirical question of the magnitude of any wage differential compared with similar non-union labour. The sources of a union’s monopoly power. Unions adopt various methods to control the supply of labour. These include: (a) Entry restrictions in the form of lengthy apprenticeships, licences and professional qualifications...

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