WHAT GIVES A UNION STRENGTH?
For a union to be effective, the demand for labor must be INELASTIC, wages can increase without significantly reducing employment. If demand for labor is elastic, wage increases will result in a large loss of jobs. What determines elasticity for labor demand?? 1. Availability of substitutes. The more (less) substitutes available for union workers, the more elastic (inelastic) the demand. Firms can substitute capital (machinery, automation) for labor. If machines are a good (poor) substitute for union workers, the demand for union labor will be elastic (inelastic). Examples: elevators, gas pumps, bar code systems, automation, ATMs, etc. The best substitutes for union workers is ????? The power of unions is related to their ability to insulate themselves from direct competition from nonunion labor. If employers can easily substitute nonunion labor for union labor, it will be difficult for unions to raise wages above the market wage. If firms can easily shift production to other countries
