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Chapter 29: Q. 1FCT (page 663)

Why might unions seeking to reduce hiring of nonunion labor desire higher minimum wages for nonunion workers?

Short Answer

Expert verified

Union members are exempt from local minimum wage laws, ensuring that they can obtain work, although at a lower wage.

Step by step solution

01

Introduction

Unionization may change wage rates in nonunion labour markets, moving them upward or downward and causing a bias in the calculation of the union wage advantage. The pure union wage advantage is the amount by which the union wage exceeds the nonunion wage that would exist if the union did not exist.

02

Given Information

Nonunion workers should have greater minimum salaries, according to unions trying to curb nonunion hiring.

03

Explanation

In a perfectly competitive labor market, raising the legal minimum wage floor above the market clearing wane rate reduces the amount of labor required by employers. As a result, exempting union members from local minimum wage laws ensures that they will be able to find work, although at a lower rate.

The best that can be done in this scenario is to compare earnings of certain types of workers in unionized marketplaces to wages of workers in nonunionized markets.

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