This document discusses wages, trade unions, and labor markets. It defines wages as payments for labor services and explains that wages are determined by the interaction of labor demand and supply. Trade unions aim to demand higher wages and better working conditions for their members. The document outlines different types of trade unions and methods they can use to raise wages, such as restricting the labor supply or increasing demand for labor. However, trade union power is limited by economic factors like demand elasticity and availability of substitutes.

1. WAGES, TRADE UNIONS AND
LABOUR MARKETS
Economics 2281

2. WAGES (SALARIES)
• Wages are payments for the services
rendered by the workers (LABOURERS)
• It is the price paid by producer to hire the
services of labourer
• As like other things prices, wages (price for
labour) is also determined by the interaction
of demand and supply of labour.
• In case of labour, Producers Demand for
labour and households supply labour in
factor markets.

3. DEMAND FOR LABOUR
• The demand for labour is derived demand. i.e. It
depends on the demand for the good that the
worker is producing.
• In other words, the demand for labour is not for
its own sake but to help in the production of
other goods. For example, the demand for
carpenters depends on the demand of furniture.
• (Derived demand occurs when the demand for a
factor of production depends on the demand
for the good that the worker is producing.)

4. SUPPLY OF LABOUR
• Size of the population.
• Retirement age.
• Minimum educational qualification.
• Working hours.
• Prevailing wage rate.

5. WAGE DETERMINATION
• As mentioned earlier, wage rate is determined by the
intersections between the demand for and the supply of
labour.
• Any changes in demand and/ or supply will trigger
changes in the wage rate.

6. WAGE DETERMINATION

7. WAGE DIFFERENTIALS
• Wage Differentials – definition
Differences In wages exist among different occupations,
within the same occupation, between males and females and
between urban and rural areas that difference is known as
wage differentials.

8. WAGE DIFFERENTIALS
Wage differentials among different occupations
• Educational qualification of the worker.
• Professional skills and computer literacy.
• Innate talent, especially musical and artistic talent.
• Nature of the job.
• Fringe benefits.
• Satisfaction.

9. WAGE DIFFERENTIALS
Wage differentials within the same occupation
• Cost of living.
• Length of service or experience.
• The company itself.
• Stringent requirements.
• Wage agreement.

10. WAGE DIFFERENTIALS
Wage differentials between males and females
• Maternity leave.
• Level of responsibility.
• Nature of occupation.
• Lack of training.

11. WAGE DIFFERENTIALS
Wage differentials between urban and rural areas
• Cost of living.
• Job opportunities.
• Farming industry.

12. TRADE UNIONS
A trade union is an association of works with the main
objective of demanding higher wages to improve its
members’ living standard.
The first trade union was set up during the Industrial
Revolution, which began in Great Britain in the 18th century,
when the capitalists exploited the workers.

13. AIMS OF TRADE UNIONS
• To demand higher wages for its members
• To improve the working conditions of workers
• To demand for better perks
• To provide recreational facilities for the workers
• To provide training courses for personal development
• To ensure that members’ interests are also represented at
national level

14. TYPES OF TRADE UNION
• General Unions
• These represents different types of workers, both skilled
and unskilled, in different industries. It is like an umbrella
trade union, e.g. the Transport and General Workers Union
in the UK.

15. TYPES OF TRADE UNION
• Industrial unions
These represents workers in a particular industry, e.g. the
National Union of Mineworkers in the UK, Pakistan Transport
& General Workers' Federation etc.

16. TYPES OF TRADE UNION
• Craft unions
• These are usually small unions that represents people of the
same occupation, e.g. musicians or teachers. Examples of
craft unions include the Singapore Teachers’ Union in
Singapore and the Graphical, Paper and Media Union in the
UK.

17. METHODS TO RAISE WAGES
• The wage rate is determined mainly by demand for and
supply of labour.
• The trade union has to work on the market forces of
demand for and supply of labour to influence the wage
rate.
• To raise wages, it can either restrict supply of labour or
increase demand for labour.

18. METHODS TO RAISE WAGES – BY RESTRICTING
SUPPLY OF LABOUR
• Increase the minimum working age
• Reduce the retirement age
• Shorten the working hours
• Increase the minimum required educational qualification
• Adopt a closed shop policy

19. METHODS TO RAISE WAGES – BY RESTRICTING
SUPPLY OF LABOUR
• Effects of restricting supply

20. METHODS TO RAISE WAGES – BY INCREASE
DEMAND FOR LABOUR
• 1. Support the advertising campaign of the company to
increase sales. With increased demand for the firm’s goods
and more sales, the firm may then employ more workers.
• 2. Increase labour productivity
the trade union can offer training to upgrade the skills of the
workers. With higher productivity of labour, the producer will
be encouraged to employ more of such workers

21. METHODS TO RAISE WAGES – BY INCREASE
DEMAND FOR LABOUR
• Effects of increasing demand for labour

22. METHODS TO RAISE WAGES – BY INCREASE
DEMAND FOR LABOUR
• 1. Support the advertising campaign of the company to
increase sales. With increased demand for the firm’s goods
and more sales, the firm may then employ more workers.
• 2. Increase labour productivity
the trade union can offer training to upgrade the skills of the
workers. With higher productivity of labour, the producer will
be encouraged to employ more of such workers

23. LIMITS TO POWERS OF TRADE UNIONS
• if Elasticity of demand for a firm’s good is elastic
• The portion of labour cost out of the total cost of
production
• Size, membership and leadership of the trade union itself
• Economic Conditions
• Availability of substitutes
• The company itself

24. THANK YOU

25. QUESTIONS & ANSWERS