Question

Initially we have a competitive labour market for plumbers in Canada. All of the workers are Canadian born, and have a similar level of skills.

With a new government, there is a significant increase of immigrants into Canada, including plumbers, with skills similar to those of Canadian plumbers. Explain what effect this will have on employment and the wage rate?

Now, suppose a union of Canadian plumbers is formed, and by law, only union members would be able to work as plumbers in Canada. List two requirements, which the union could insist on before new members could join the union. Further, if the efforts of the union are successful, explain how this will affect the market wage, and the level of employment.

Answer 1

                                    In the given case, it is said that in the original scenario, the competitive labour market for plumbers in Canada consisted of all the workers who are born in Canada with similar skill levels. With the change of government, the number of immigrants are seen to increase and the following are the major effects of these rising immigration on the employment and wage rate in Canada

· The effect of these migrants would depend on many factors like the skill base of the immigrants, skill levels of the existing workers and the availability in the economy.

· The labour demand could get adjusted between short and long run and hence the effects would be different

· With increased inflow of labourers, the competition is likely to be increased in the local market, but at the same time, the number of jobs may also be increased as a result of increased consumption in the economy.

· In the short-term, the competition for jobs would be increased and hence the wage rate would get reduced.

· The extend of unemployment would depend on the extend to which the existing workers are capable of accepting the new lower wages.

· The workers of low skilled occupation are expected to face more competition than those of high skilled workers.

· If the skills of the migrants are different to those of the existing workers, this would mean that the consumption and production levels in the economy would be increased and hence all the workers would experience an increase in the wages.

In the next case, it is said that a union of Canadian plumbers is formed. The following are the two major requirements the union could insist before the new members could join the union

· Since a union of Canadian plumbers is formed, more preference would be given to the Canadians and hence the union may insist for Canadian membership as some reservation categories.

· Since the skill levels of the members of the union are important, the union may insist those who aspire for the membership to showcase the minimum skill level to be a member

The following would be the likely impact of the success of the union on the wage rate and the employment levels

· Since the union represents a standard group with a set of rules and regulations, this would mean that a minimum wage would be assured for the members

· In case of employment, those who are the part of the union would be protected from job losses in unnecessary situations.

· Although in the short run, there may be difficulties in acquisition of jobs, the presence of a union would result in better jobs in the long run

· Thus, we can conclude that in the long run, a better job accessibility, job security and better wage scale with improved wage security would result from the formation of a union