When a union bargains successfully with an employer, what happens to unemployment and wages in that industry? a. unemployment and wages increase b. unemployment and wages decrease c. unemployment decreases and wages increase d. unemployment increases and wages decrease
The Correct Answer and Explanation is:
The correct answer is d. unemployment increases and wages decrease.
Explanation:
When a union successfully bargains with an employer, it often negotiates for higher wages, better working conditions, and other benefits for its members. However, the impact on the industry as a whole can have mixed effects, especially when it comes to unemployment and wages for non-union workers.
- Wages Increase for Union Workers: The immediate outcome of a successful union negotiation is that wages for unionized workers in that industry tend to rise. The union’s power to bargain gives its members leverage to secure higher pay and benefits compared to non-union workers.
- Unemployment May Increase: While unionized workers benefit from higher wages, the employer might respond by reducing the number of workers or cutting back on hiring to compensate for the increased labor costs. In industries where labor is a significant cost, businesses may adopt automation, outsource jobs, or even move production to regions with lower labor costs, resulting in a rise in unemployment for non-unionized workers or even some unionized workers.
- Effect on Non-Union Workers: The increase in wages for union workers could also have a ripple effect on non-union workers in the industry. Employers may try to keep the wages of non-union employees lower, but the rise in the wage floor set by the union could lead to job cuts, as businesses may find it less profitable to employ workers at the new wage rates. In addition, non-unionized workers might face fewer job opportunities as companies become more selective or reduce hiring in the face of higher labor costs.
Thus, although wages increase for unionized workers, the broader effect often leads to higher unemployment as businesses adjust to the cost increases, which is why the overall trend is unemployment increases and wages decrease in the wider context of the industry.
