Question

a. From an economic perspective, what are the marginal benefits of private sector unions in the U.S.?

b. From an economic perspective, what are the marginal costs of unions in the U.S.?

c. Do the marginal benefits exceed the costs? Why or why not? Note that this is a societal level marginal analysis, so your costs and benefits must be societal level.

Also, marginal costs are the opportunity costs which you need to identify.

Also Note: Do not address public unions as the dynamics are different and not covered in the text.

Answer 1

a) Marginal benefits of private sector unions are over exploitation of labour . Very low wages , better organized work force . Impoverished workers causes human capital to deplete . So a minimum standardized wages ensures development of human capital .

b) Marginal costs are that the unionized wage rate is higher than equilibrium wage . So demand for workers fall causing unemployment to rise . Cost of production rises , so price of goods rise and supply of goods fall .

c) If the unionized wage is set upto a considerable level , it will not hamper the economy . Rather the benefits like growth of human capital could be reaped . In this case benefits exceed cost . The marginal costs like little higher price and little more unemployment can be dealth with by expanding production units .