Union Power and (Un)Employment

Abstract

Abstract Is the monopoly face of unions, i.e. their ability to enforce wages above what non‐unionised firms would pay, harmful to employment and output? It is shown that a positive answer to this question is far less compelling than commonly held views based on a negatively sloped labour demand curve suggest. First, the labour demand curve may be irrelevant for the employment decision of unionised firms. Second, even if the labour demand curve is relevant, selfish union workers are likely to accept a system of wage discrimination which does away with discrepancies between the marginal product and the reservation wage. And third, the labour demand curve may have a positive slope.

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