Deck 13: Unions and the Labor Market

Question 1

Section 14B of the Taft-Hartley Act

A) permitted individual states to pass "right-to-work" laws.
B) prohibited "yellow dog" contracts.
C) required compulsory arbitration of contracts.
D) contained provisions to increase democracy within unions.

Answer 1

A

Question 2

Employee benefits and the share of compensation that goes to benefits are usually

A) roughly equal in unionized and nonunionized firms.
B) higher in unionized than in nonunionized firms.
C) lower in unionized than in nonunionized firms.
D) impossible to compare between unionized and nonunionized firms due to insufficient data.

Answer 2

B

Question 3

Unions tend to

A) increase wages for white-collar and blue-collar members by roughly the same amount relative to non-union workers.
B) increase relative wages more for blue-collar workers.
C) increase relative wages more for white-collar workers.
D) encourage high levels of education and training for their members.

Answer 3

B

Question 4

If one sector of the economy becomes unionized and there is a spillover effect then

A) wages will increase in both sectors.
B) wages will increase in the unionized sector, but may either increase or decrease in the non-union sector.
C) wages will stay unchanged in both sectors.
D) wages will increase in the unionized sector, but decrease in the non-unionized sector.

Question 5

If attitudes change and unions are perceived as dangerous to American companies' ability to compete in the world market,then

A) the demand curve for union services will shift to the left.
B) the demand curve for union services will shift to the right.
C) we will move to the left along the demand curve for union services.
D) we will move to the right along the demand curve for union services.

Question 6

Which of these probably has played the LEAST important role in the drop in unionization rates in the United States over the past 20 years?

A) the increase in the share of employment by female workers
B) the increase in the share of employment in sunbelt states
C) resistance to unionization by employers
D) increased competitive pressures within product markets

Question 7

Unionization rates in the United States are highest

A) among white workers.
B) among young workers.
C) in the government sector.
D) in the manufacturing sector.

Question 8

The union resistance curve would shift inward due to

A) the hardening of workers' attitudes after a strike begins.
B) an outward shift in the employer resistance curve.
C) a rise in the unemployment rate.
D) the ability of members to collect unemployment insurance benefits during a strike.

Question 9

The relative union wage advantage is generally

A) about 50% in the United States.
B) smaller in the United States than in Europe.
C) larger in the public sector than in the private sector.
D) larger during recessions.

Question 10

Estimating the effect of unions on wages is difficult because

A) data on wages in union and non-union jobs are scarce.
B) relative wage effects are often indeterminate.
C) there is no way to estimate what wages would be if unions did not exist.
D) unions have no effect on the non-union segment of the labor market.

Question 11

The potential gains to a union in terms of wages and employment will be greatest if the firm's demand for labor is

A) elastic.
B) inelastic.
C) of unit elasticity.
D) horizontal.

Question 12

Increases in the minimum wage can help unions by

A) increasing the welfare of non-union workers.
B) increasing the demand for labor.
C) increasing costs faced by employers.
D) increasing the cost of substituting non-union labor for union labor.

Question 13

In the asymmetric-information model of strike activity,employers who provide better information about their profitability to their employees

A) should see a decrease in frequency of strikes, but an increase in duration.
B) should see an increase in frequency of strikes, but a decrease in duration.
C) should see an increase in both frequency and duration of strikes.
D) should see a decrease in both frequency and duration of strikes.

Question 14

Threat effects are

A) increases in union wages from threats to strike.
B) increases in non-union wages from threats to unionize.
C) decreases in union wages from management threats to use replacement workers during a strike.
D) decreases in non-union wages from the threat of replacement by unemployed union members.

Question 15

The ________ Act established the National Labor Relations Board and required employers to bargain with unions representing the majority of their employees.

A) Norris-LaGuardia
B) National Labor Relations
C) Taft-Hartley
D) Landrum-Griffin

Question 16

Large union wage increases in declining sectors can be explained by

A) industries' inability to substitute capital for labor while product demand is falling.
B) unions' decision to make wage gains more important than employment guarantees.
C) industries' unwillingness to negotiate with unions.
D) industries' ability to sell used capital if necessary.

Question 17

Union membership in the United States is currently ________ other industrialized countries.

A) lower than in
B) higher than in
C) similar to that in
D) around the median of

Question 18

The "price" of being in a union includes

A) membership dues.
B) the amount by which wages increase due to union membership.
C) the time spent on union activities.
D) all costs, including money and time.

Question 19

Empirical studies have concluded that unionization ________ productivity and ________ profit rates.

A) has no consistent effect on; has no consistent effect on
B) has no consistent effect on; reduces
C) reduces; has no consistent effect on
D) reduces; reduces

Question 20

Wait unemployment

A) occurs when union workers strike for wage increases.
B) will increase the size of the spillover effect.
C) occurs when workers choose unemployment over non-union jobs.
D) will cause the supply of labor to shift further to the right in the non-union sector.

Question 21

"Both the elasticity and the position of the labor demand curve are fundamental constraints on a union's ability to accomplish its objectives." Explain why and illustrate your answer graphically.

Question 22

Many unions have favored import quotas and tariffs because

A) they want to shift demand towards the goods they produce.
B) they are trying to increase the welfare of all Americans.
C) they want their employers to substitute labor for capital and other inputs.
D) All of the above.

Question 23

A vertical contract curve implies that

A) both firm and workers are receiving economic rents.
B) union wage increases will cause large losses in employment.
C) the firm's output will increase when wages rise.
D) the firm operates in a perfectly competitive product market.

Question 24

Suppose a study found that union wages were 10% higher than nonunion wages.Unions will have actually raised wages by more than 10% when

A) union workers who lost their jobs found work in the nonunion sector.
B) consumers shifted their demand to the lower priced nonunion goods.
C) nonunion employers raised their wages in response to the threat of being unionized.
D) union workers are more productive workers than nonunion workers.

Question 25

Which of the following statements is generally true about unions?

A) Unions raise wages in the range from 30 to 40%.
B) Public sector unions raise wages more than private sector unions.
C) The union wage advantage is higher in Europe than it is in the United States.
D) Unions reduce the dispersion of earnings among workers.

Question 26

Suppose the firm's demand for labor is L? = 100 - W.The supply of labor is perfectly elastic at a wage of $20.If a monopoly union's goal is to maximize total rents (= [WU - $20] × L),what wage will it seek?

A) $20
B) $40
C) $60
D) $80

Question 27

Any point on the contract curve will

A) make the union better off than they would be in monopoly union negotiations.
B) make the firm better off than they would be in monopoly union negotiations.
C) make both the union and the firm at least as well off as they would be in monopoly union negotiations.
D) make both parties worse off than they would be in monopoly union negotiations.

Question 28

Suppose all textile workers in the United States formed a union.Which of the following will make it more likely the union will ask for a larger wage increase (assuming the union cares about both higher wages and retaining jobs)?

A) Labor costs represent a large share of textile production costs.
B) Textile firms will not invest in capital substituting for labor in producing textiles because textiles is a declining industry.
C) Labor is a good substitute for capital.
D) Textile buyers consider U.S. textiles a good substitute for non-U.S. made textiles.

Question 29

Suppose that a union increases wages by 10% but that the impact of this is exactly offset by the union also increasing labor productivity by 10%.Which of the following will occur if the firm can freely set employment levels?

A) Employment will fall by 10%.
B) The cost of output will go up 10%.
C) Demand for output will go up by more than 10% if the price elasticity of demand is greater than one.
D) The firm will substitute labor for capital.

Question 30

If both parties are risk neutral,then

A) there will be a larger number of possible voluntary agreements that the parties may reach.
B) the parties each prefer a certain outcome to an uncertain outcome, if the expected gains are equal.
C) the contract zone will reach its minimal size.
D) their utility functions will be concave.

Question 31

What is a right-to-work law?

Question 32

What has happened to the percentage of union membership in the private sector since the 1970s? What are the demand-side factors that would account for the trend you identified? What are the supply-side factors accounting for the trend you identified?

Question 33

Which of the following best describes the economic nature of a union?

A) a monopoly
B) a monopsonist
C) a producer of public goods
D) an agency assuring workers get a wage reflecting their supply price of labor.

Question 34

If both parties become more risk averse,then the contract zone will

A) increase in size.
B) decrease in size.
C) not change in size.
D) move to the right along the horizontal axis.

Question 35

What are the two types of unions operating in the United States? What do unions do?

Question 36

Suppose a study finds that union wages are 10% higher than nonunion wages.This will likely overstate the true advantage of working in the union job when

A) the nonunion job has better skilled workers.
B) the union job has poorer working conditions.
C) workers losing union jobs seek out non-union jobs.
D) unemployment is high.

Question 37

Unions usually have which of the following effects?

A) They increase the profits of unionized firms by motivating workers to work harder.
B) They increase the growth rate of employment in unionized firms as more workers are attracted to unionized jobs.
C) They increase the fraction of total compensation paid in the form of employee benefits.
D) They decrease the total compensation of unionized workers.

Question 38

A union cares both about what its members are paid and the number of jobs held by its members.Suppose that the union sets a wage level that maximizes its utility level subject to the constraint that the resulting wage/employment combination must lie on the labor demand curve (call this the monopoly union outcome).Is the monopoly union outcome efficient? Why or why not? Illustrate your answer graphically.

Question 39

The efficient contract model implies that

A) the union and the employer are both better off than they would be in a monopoly union model.
B) the union maximizes a utility function, subject to the firm's labor demand function.
C) the union negotiates only on wage levels, not on employment levels.
D) firms have more negotiating power than unions.

Question 40

A union raises the wage of firm X from $10 to $15 an hour.In which of these cases is there a direct reduction in the social welfare?

A) Worker A retains their job at company X, such that company X's profits associated with worker A go down $5 an hour.
B) Worker B, working for firm Y gets a lower wage due to the spill-over effect.
C) Worker C, who is getting $7 an hour working for firm Z, would have otherwise gotten a job with firm X at a wage of $8.
D) Worker D, who is working for firm M, gets a higher wage due to the threat effect.

Question 41

Do unions increase worker productivity?

Question 42

What is the difference between the union relative wage advantage and the union absolute effect? Which is larger? Explain and illustrate your discussion with the appropriate graphical analysis.

Question 43

What is interest arbitration?

Question 44

Strikes are more likely and of longer duration in periods of relative prosperity.Use the Hicks Bargaining Model to account for this empirical observation.

Question 45

What is the union relative wage advantage? What is the estimated value of the union relative wage advantage?