TM875

Okay...let's get out the (neo-conservative? please. That comment hurt more than anything else) textbook.

:usts off the Econ 101 textbook from college::

Let's keep this simple. Page 656 of Economics by McConnel/Brue, speaking on the effects of the union wage advantage on the allocation of labor:

"[The] loss of output suggest that the union wage advantage has resulted in a misallocation of labor and a decline in economic efficiency"

Assuming that normal wage, Wn, is given when employment is equal to N1; Unions reduce employment to a lower amount, N2, while raising wages to Wu. Output falls.


However, I will relent to you on one thing - it is extremely difficult to tell, in the long-run, if unions help industries or not. I will agree that they reduce worker turnover and, in that area, increases productivity.

Yes, I completely agree. However, if it wasn't for unions pricing themselves out of a job (and, therefore, pricing the industry out of this country), then maybe we'd still have a number of our industries here and not have such an abhorrable trade deficit. Maybe.

The "too-high" price I was referring to was a price that should not have to be charged. The union's increased wage cost (Wu) creates a higher ATC (average total cost) for the firm. Therefore, for TC (total cost) to equal TR (total revenue), thus a normal profit found under perfect competition, the price of the good must be higher. Since the price is higher, the quanitity of goods sold along the demand curve decreases to the left along the curve. The result? Fewer sales and lower efficiency of the firm.

And, for the record, don't put words in my mouth. I respect you for going through the schooling needed to get an economics degree and your military experience, but I believe they must be teaching a different sort of economics in Canada.

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"I've made only one mistake in my life. But I made it over and over and over. That was saying 'yes' when I meant 'no'. Forgive me."