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The Labour Market and The Role of Trade Unions
Topic Eighteen

Previous - Factors of Production

The Resource Markets

The resource market is a market where a firm can go and purchase resources to produce goods and services. Resource markets can be distinguished from product market where finished goods and services are sold to consumers. The resource market is mainly made up of the labour and capital markets. In the capital market, individuals save money and firms borrow this money that is saved by individuals to invest and manufacture goods for sale to individuals in the product market. In turn, individuals supply their labour to firms in the labour market. On the other hand, firms demand labour in the labour market.

Marginal Productivity Theory

The theory used to analyze the profit-maximizing quantity of factors of production or inputs purchased by a firm for the production of output is called the marginal-revenue productivity theory (MRP). This theory indicates that the demand for a factor of production is based on the marginal product of the factor. In particular, a firm is generally willing to pay a higher price for an input that is more productive and contributes more to output. The MRP provides insight into the demand for factors of production based on the notion that a profit-maximizing firm hires inputs based on a comparison between the productivity of the input and the cost of the input.

Economic Rent and Transfer Earnings

Economic rent refers to income earned from a factor of production which is greater than the minimum necessary to bring the factor of production into operation. For example, suppose a cricketer is willing to be paid $10,000 a week but is really paid $12,000, then his economic rent will be $2,000. Economic rent is the area that is between the supply curve and the wage rate. The supply curve indicates the minimum wage people are prepared to work at as can be seen in the following graph.

Transfer earnings are defined as the minimum payment necessary to prevent a factor of production from moving to a different use; in this case it is labour. For example, Darren is a manager of a grocery and is paid $40,000 a year. Another grocery which he is interested in working at because it is closer to his home is willing to pay him $30,000 a year. Once his salary at his current job remains at $40,000 a year, he will remain at this job. However, if his present salary decreases to $30,000 a year, he will want to transfer to the other grocery closer to his home because this other grocery’s yearly salary of $30,000 will be valued more to him because it is closer to his home than his $30,000 from his present job. His transfer earnings there will be $30,000 and the $10,000 will be his economic rent. Economic rent equals total earnings minus transfer earnings.

Mobility of Labour

Mobility of labour relates to the way in which labour is mobile or can shift between occupations and districts. There are two types of mobility of labour which are:

1. Occupational mobility

Occupational mobility refers to the way in which employees can shift between jobs or from one job to another. There are some factors that influence or determine or even obstruct persons from changing jobs in this manner. Some of these factors are as follows:

Psychological Factors – refer to the interest, ability or capability as well as the personality of the person to change to a specific job of interest.

Social Factors – can have a huge impact on the occupation an individual chooses to attain. Attitudes, institutions and social setting all fall within the definition of social factors. Social setting is very critical in forming a person personality.

Economic Factors – persons who grow up under good economic circumstances stand a better chance of becoming what they desire. This is so because economics play a very important part in almost everything in society.

2. Geographical Mobility

Geographical mobility refers to the movement of labour from one part of a country to another or from one country to another. There are some factors that influence or determine or even obstruct persons from changing jobs in this manner. Some of these factors are as follows:

Financial reasons – relocating to another country may cost a huge amount of money which some persons may not possess. Such persons will be prevented from moving to another country or region to work because they may not be in a position to afford such a move.

Culture – the culture and even language in some countries are different. Even in cases where language is not a problem, the issue of culture can pose a serious challenge to people which can determine whether they relocate to another country to work.

Trade Unions and Labour

The following are some of the roles of trade unions in the Caribbean:

Collective bargaining – trade unions can represent workers in having equal bargaining power with their employers, who traditionally had the ability to exclusively set the terms and conditions of work and pay. Since the union comprises a group of workers, it has a greater voice than if employees are to deal with employers individually.

Employee welfare – trade unions have successfully fought for better working terms and conditions for workers in some countries. They represent workers’ interests and have secured a variety of benefits, such as higher wages for unionized employees, work-life balance characterized by reasonable work schedules, job security and protection from arbitrary action by employers.

Protection against unfair labour practices – labour unions monitor the unfair labour practices of employers. Some of these unfair treatments include lower wages, unsafe working conditions that can threaten the health of employees.

Legislation – unions also play a key role in developing and amending labour laws and regulations for effective worker protection. The unions initiate the push for regulation in areas that concern employees in the workplace.

Next - Distribution Of Income - Poverty