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Unions and Wages

Minimum wages

37%of full-employees received less than 68% of average income

1. Many dont live in low income households

2. Poverty depends on dependants

3. Many in poverty are unemployed

4. National minimum wage should still help

1.     Protects weak employees(eg with other responsibilities)

2.     It causes unemployment,0.5average minimum raises wage costs by 1%(depends on co)

3.     Labour productivity can increase:

1. Efficiency wage effect(can afford more food)

2. Better management

USA no unempl. evidence. UK wage councils were abolished because inconsistent with flexibility.

The Natural rate of unemploymnent-8%

Does not affect inflation and can be reduced by supply side measures


1. Increase productivity(new capital, investment, training)

2. Encourage employers to offer jobs to LTerm unemployed

3. Remove disincentives(high marginal tax)

4. increase geogr. flexibility

5. Reduce work searching costs by work experience

Natural unempl. is coz:

1. Trade unions and social security generosity

2. Terms of trade in favour decrease it

3. Oil kept lower

4. Skill mismatch(rapidly restructuring industry)

The EU social charter(UK opt out)

was set against social dumping(multinationals go for least legislation and low wage

Treaty came into effect w/o charter(UK vetoed). UK accepted:

1.     Multinationals must inform labour

2.     Part-time(mainly women) have equal rights

3.     Working time(max48h,4weeks paid holiday)

4.     Wages are now determined locally, performance related pay, 73 72%was collective, now 47%

2 types of labour

1.     core(well skilled, multifunctional)

2.     peripheral(can be hired/fired easily)

Numerical(lot in UK)and functional flexibilities exist. Numerical flex. provides more low-paid jobs, employed have less poverty.

UK has no future as low wage economy, technical mark-up must be high

Union data

First time<50%. Proffesionals52, clerical28, sales11, 80full time, 56male, 62public, 28private. Union density greatest at non-privatised firms(rail83).50+age38%,<20age5%

New PTC 01.96 union-public service, tax, commerce union.

Division of labour:


1.             increase in skill and dexterity.

2.             time saving

3.             individual aptitudes(can do what best at)

4.             use of mashinery

5.             managerial control


1.             interdependancy

2.             dislocalisation (strike in one causes big losses)

3.             unemployment

4.             alienation(no job satisfaction)


Wage differentials are coz

1.     Labour market imperfections(monopolies,no info),Non homogeneity,Barriers to mobility

Search theory - wage lower if searched for long time

2.     Education&training - human capital investment.Demand for skilled rises&unskilled falls

3.     Working conditions+Non-monetary rewards

4.     Regional variations - employers go to low wages,employees to high,so equilibrium occurs

5.     Wage discrimination - age,sex,race.Women earn 20% less,black 17%less

They dont get better jobs&are not promoted

6.     Vocationalism(job like leisure or hobby,nursing)

1970 Equal Pay Act,1975Sex discrimination,1976 Race relations

 Supply side to fight against:

1.     Monopoly restricts the employment of a labour,because it has to pay more to existing

2.     Supply of labour depends on population&is highly inelastic

3.     The leisure preference might make the supply curve to slope backwards

4.     Occupational&geographical immobility exists

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