Labor Economics Alternative Pay Schemes Research Paper

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However, other factors must also be considered. They refer to age, family, education, distance and unemployment.

The age factor points out that younger people are more likely to migrate than older workers. This can be explained by the fact that the elderly have fewer years in which to benefit from the migration investment and that they often possess skills valuable for their current employer. The familial forces reveal that the risks associated with moving increase with the size of family; otherwise put, a family of two is more likely to move than a family of five. The educational features highlights that the higher educated the subject is, the more chances are he or she will migrate. The distance force points out that while the distance is short, the worker will vote in favor of migration; on the other hand, if the distance is longer, he will manifest reticence to moving. Ultimately, the unemployed people are more likely to migrate than the employed ones.

The consequences of migration first set of consequences are felt by the individual. In this order of ideas, the income of the mover is highly likely to increase. The estimated return on the investment is between 10 and 15% and in actually measuring it for each individual, one must also account for the uncertainty and the uneven distribution of information, the timescale of the earnings, the income registered by the spouse, earning disparities or wage reduction as a result of downsizing. Then, in terms of the effects upon the labor markets, studies have revealed an increase in job allocation efficiency, combined with a narrowing of the wage.

But despite the above presented benefits of migration, the phenomenon is still frowned on. This could be explained by the negative consequences it generates, such as a misallocation or extensive use of resources, leading to negative impacts upon the natural environment (i.e. water pollution).

Capital and product flows

The migration of the labor force is also influences by less direct forces, such as the flows of other capitals and manufactured items. The author best explains this relationship by exemplifying the cases of the United States and South Korea. Since the U.S. wage rates are considerably higher than those in South Korea, two situations are likely to occur:

capitals will flow from the United States to South Korea the products made in Korea will be significantly cheaper

Whichever the most prominent situation, fact remains that the demand for jobs in the U.S. will decrease, whilst the demand on the South Korean labor market will increase. Therefore, the differential on wage will narrow and no labor migration will occur.

Chapter 10: Labor Unions and Collective Bargaining

The tenth chapter commences by stating the sensitivity of the topic on unions, revealing that just like any astringent social or political matters, individuals may share different, if not opposing views.

Why unions?

The need for unions arose with the massive industrialization of labor. To better explain, in the time when agriculture was the most important source of income and commodities, farmers were both employees and employers; they were self-sufficient. As industrialization occurred however, the people came to depend on factory owners for their incomes. As such, they needed unions to promote and protect their rights.

Labor unions: facts and figures

The appurtenance to a union depends on various factors, such as industry and occupation, geographic location or personal characteristics of the employee. The industry and occupation force reveals that most employees belonging to unions are present in public administration, transports, information and public utilities. At the other extreme sit the employees in agriculture, the retail personnel and the employees in finance, insurance and real estate. In terms of personal characteristics, males are more likely to belong to unions, as are African-Americans or the individuals over the age of 25. In terms of geographic location, the least unionized workers leave in the southern part of the country. New York, California, Pennsylvania, Illinois, Ohio and Michigan are the most heavily industrialized states and account for half of the unionized workers across the U.S.

The American unions are organized into three categories: federation (AFL-CIO), national unions and local unions.

Unionism's decline

By 2006, within the agricultural sector of instance, only 11% of the workers had subscribed to unions. One can then observe that unionized labors are in minority. And not only this, the tendency is that of a historical decline. The structural change hypothesis forwards the idea that the decline is based on a variety of changes affecting the economy and the labor force. These changes could include modifications in consumer demands, the emergence of small economic entities which do not unionize, or the fact that the growth of the labor market has been based on more jobs for women and other groups, which have proven difficult to organize under the umbrella of a union.

Another hypothesis suggests that the decline is in fact due to the oppositions forwarded by the organizational management. The substitution hypothesis sees that the benefits for which the unions have been struggling are now being offered by the government and other institutions and this is then why the need for unions decreased.

What do unions want?

The historical response to the posed question is that the unions generally fight for better wage and employment conditions for their members. Some unions however strive to achieve monopoly, but this has yet to prove an efficient economic model. The more suitable alternative would be that of following efficient contracts, which increase the utility for both parties involved.

Strikes and the bargaining process

Strikes generate financial losses for both union and employer; therefore, most conflicts are settled without the occurrence of strikes. Most disputes are addressed through bargaining and whenever a strike occurs, it the result of an inefficient bargaining process. For instance, when one party is unable to properly identify the intentions of the other party, an incidental strike occurs. When the parties use different pieces of information, the strike created are called asymmetric.


McDonnel, B.M., 2008,…

Sources Used in Document:


McDonnel, B.M., 2008, Contemporary Labor Economics, 8th Edition, the McGraw Hill Companies

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