F583 - Economics of Work and Leisure - June 2014

Trade unions may be monopolies or oligopolies.

Trade unions are labour organisations that seek to promote the interests of their members by negotiating wages and working conditions on their members' behalf. By doing so, they make use of collective bargaining, which is more probable to ensure wage rises/improvements in working conditions, as opposed to individual employees negotiating for themselves - as such employees may lack persuasive skills, or may, on their own, not disrupt the production process by much if they were to strike.

Trade union power is determined by:


Why trade unions are a market failure:



They may cause unemployment by taking advantage of their bargaining power to artificially push wages up. This pushes wages up from W to W1, which creates a disequilibrium in the labour market (otherwise known as a labour market failure). When this occurs, the quantity of labour employed decreases from Q to Q1, which creates additional unemployment. (You could also argue that they shift the supply curve left by forcing employers to require higher qualifications.)

Solutions:

oh right, didn't know that haha, i just assumed they could throw in anything there. In that case, i'd much rather data response be on the harder trade union/monopsony stuff, and the essay on leisure markets

Thank you! This has been very helpful. Am I correct in saying that on your first diagram of the effect of a trade union on unemployment, that in addition to the unemployment created through the contraction in demand, would unemployment increase further due to the extension of supply (as more people are willing to work at the new wage rate)? Is what I've drawn on the diagram correct? Thanks

Thank you! This has been very helpful. Am I correct in saying that on your first diagram of the effect of a trade union on unemployment, that in addition to the unemployment created through the contraction in demand, would unemployment increase further due to the extension of supply (as more people are willing to work at the new wage rate)? Is what I've drawn on the diagram correct? Thanks

Trade unions may be monopolies or oligopolies.

Trade unions are labour organisations that seek to promote the interests of their members by negotiating wages and working conditions on their members' behalf. By doing so, they make use of collective bargaining, which is more probable to ensure wage rises/improvements in working conditions, as opposed to individual employees negotiating for themselves - as such employees may lack persuasive skills, or may, on their own, not disrupt the production process by much if they were to strike.

Trade union power is determined by:


Why trade unions are a market failure:



They may cause unemployment by taking advantage of their bargaining power to artificially push wages up. This pushes wages up from W to W1, which creates a disequilibrium in the labour market (otherwise known as a labour market failure). When this occurs, the quantity of labour employed decreases from Q to Q1, which creates additional unemployment. (You could also argue that they shift the supply curve left by forcing employers to require higher qualifications.)

Solutions:


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Monopsony: a single buyer in a market. As the chapter is labour market failure, it's usually about a single buyer of labour: such as the NHS for nurses.

The monopsony's bargaining power can also be determined by the determinants listed above.

As profit maximisers (you may want to think about a private sector monopoly in this case, maybe supermarkets and checkout assistants or something), firms will employ workers up to the point where their MCL (wage rate), is equal to the MRP they bring in for the company. This can be displayed using a diagram:



As the monopsony is the only employer of this labour, labour units (how highly impersonal) know that they have no where else to look for employment, and so are effectively powerless in determining their wages. Thus, employers can pay an average wage of w (in the diagram), employing Q employees (employing up until MRP=MCL to profit maximise).

This is a market failure (I'm a little unsure here) as the amount of money labour units command for their efforts is lower than the equilibrium wage if there was perfect competition in the labour market.

Solutions




If a NMW is applied that is above the wage the employees currently earn, then it will lead to an increase in both the wage rate (from W to W1) and the number of individuals employed - which would be more reflective of the labour market equilibrium in perfect competition.

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A bilateral monopoly can also exist. This is where there is a single supplier of labour and a single buyer. For instance, state school teachers and teaching unions. In this situation, this diagram can be used:



The wage will be somewhere between W and W1, depending upon the relative bargaining strength of the firm and the union. If, for instance, the union has a large degree of public sympathy for its efforts in striking, the firm might wish to concede and raise wages for fear of losing sales. This would lend the union more power, which would mean that the wage would likely be nearer to W1 than W. The wage will never increase above W1 because the firm would then no longer be employing up to the point where MRP=MCL (so it wouldn't be profit maximising).

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So yeah, that's what I know about the two. I don't know if I have enough analytical points for a 15 marker on, say, why a trade union causes market failure. Unless I can stretch out the explanation of how they have power to determine wages in the first place, the actual analysis seems fairly simplistic.

I believe so too, and woah.. Wait I've always been told that Leisure markets can only come up once? Either as Data response and then questions on Labour Markets OR Labour Market Data response, 2 Labour Market questions and then 1 Leisure Markets question... By questions I mean essays.

Haha yeah, I was slightly upset at this news.

Nonetheless, I'm expecting it to be a much harder paper considering many people were happy with the F585...
I'm going to settle with diagrams, Leisure Markets tonight (taking it easy today, way too much maths revision) then move onto papers tomorrow evening hopefully.

How many papers have you done btw? If so do you know of any "comment on" points which are easy to gain marks on. Say for F581 we have the whole 'business relevance' 'elasticity' 'magnitude' comment on marks; what can possibly to do get the same for F583??

What's data response? Sorry my teacher has deprived us of basic knowledge, like in F585 I wouldn't have known that the first 4,610 markers would be on extract 1&2 and second batch of questions is on extract 3&4 and the last question is on the last extract , so can anyone tell me the structure of this please?

Trade unions may be monopolies or oligopolies.

Trade unions are labour organisations that seek to promote the interests of their members by negotiating wages and working conditions on their members' behalf. By doing so, they make use of collective bargaining, which is more probable to ensure wage rises/improvements in working conditions, as opposed to individual employees negotiating for themselves - as such employees may lack persuasive skills, or may, on their own, not disrupt the production process by much if they were to strike.

Trade union power is determined by:


Why trade unions are a market failure:



They may cause unemployment by taking advantage of their bargaining power to artificially push wages up. This pushes wages up from W to W1, which creates a disequilibrium in the labour market (otherwise known as a labour market failure). When this occurs, the quantity of labour employed decreases from Q to Q1, which creates additional unemployment. (You could also argue that they shift the supply curve left by forcing employers to require higher qualifications.)

Solutions:


---

Monopsony: a single buyer in a market. As the chapter is labour market failure, it's usually about a single buyer of labour: such as the NHS for nurses.

The monopsony's bargaining power can also be determined by the determinants listed above.

As profit maximisers (you may want to think about a private sector monopoly in this case, maybe supermarkets and checkout assistants or something), firms will employ workers up to the point where their MCL (wage rate), is equal to the MRP they bring in for the company. This can be displayed using a diagram:



As the monopsony is the only employer of this labour, labour units (how highly impersonal) know that they have no where else to look for employment, and so are effectively powerless in determining their wages. Thus, employers can pay an average wage of w (in the diagram), employing Q employees (employing up until MRP=MCL to profit maximise).

This is a market failure (I'm a little unsure here) as the amount of money labour units command for their efforts is lower than the equilibrium wage if there was perfect competition in the labour market.

Solutions




If a NMW is applied that is above the wage the employees currently earn, then it will lead to an increase in both the wage rate (from W to W1) and the number of individuals employed - which would be more reflective of the labour market equilibrium in perfect competition.

---------

A bilateral monopoly can also exist. This is where there is a single supplier of labour and a single buyer. For instance, state school teachers and teaching unions. In this situation, this diagram can be used:



The wage will be somewhere between W and W1, depending upon the relative bargaining strength of the firm and the union. If, for instance, the union has a large degree of public sympathy for its efforts in striking, the firm might wish to concede and raise wages for fear of losing sales. This would lend the union more power, which would mean that the wage would likely be nearer to W1 than W. The wage will never increase above W1 because the firm would then no longer be employing up to the point where MRP=MCL (so it wouldn't be profit maximising).

---

So yeah, that's what I know about the two. I don't know if I have enough analytical points for a 15 marker on, say, why a trade union causes market failure. Unless I can stretch out the explanation of how they have power to determine wages in the first place, the actual analysis seems fairly simplistic.

What's data response? Sorry my teacher has deprived us of basic knowledge, like in F585 I wouldn't have known that the first 4,610 markers would be on extract 1&2 and second batch of questions is on extract 3&4 and the last question is on the last extract , so can anyone tell me the structure of this please?

yeah that's what i reckon aswell, i don't think it'll be too hard but still harder than standard. haha im gonna have to start f583 work tomorrow, spent all of today absolutely cramming for M1 which is gonna be a bloodbath of the finest.

ive done quite a few, can't remember how many, but im gonna be doing them again as its been a fair while since i did them, and like do them in timed conditions and send them to my teacher for marking, doing it properly haha that's a problem for me too, i don;t think there are any generic comment marks cos it differs depending on what the question is, although i guess the usual "it depends on" is a good failsafe option if you can't think of anything else

basically, there'll be a case study at the front of the exam, and the first 25 marks will be based upon that case study (a bit like F581 and F582 were done) then the remaining 35 marks will be the 15 mark and 20 mark essay (you get a choice of 3 of these)

Here.

Could anyone explain how I would write an essay on how inequality is measured and the causes... very confused, thanks

for measuing inequality, you would just talk about the Lorenz Curve and the Gini coefficient, and then draw the diagram showing the Lorenz Curve.

On that regard, im not so sure i fully understand the Lorenz Curve, can anyone explain it?

Do you have the mark scheme?