As we saw, unions can raise wages in a sector of the economy by restricting the number of workers in that sector. Let€™s see what tends to happen to the workers who don€™t get jobs in those favored unionized sectors. We'll recycle the computer programmer data to illustrate:

a. As before, there are 100 workers. In 2084, after decades of complaining about low wages, the programmers at Robotron have a secret-ballot vote and form a union. Their new union bargains for a wage of $80 per hour, and the newly unionized programmers are very excited. How many workers will Robotron hire at the new, higher wage?

b. How many Robotron workers just got laid off? Compare your answer to part a against the answer to question 2c to find out.

c. A natural choice for the other programmers is to look for work at Korrexia: As before, the remaining workers have perfectly inelastic labor supply, so all 100 workers are going to work at one of the two firms. What’s the wage for the nonunion Korrexia workers? How many programmers work for Korrexia?

d. You might think that one solution is to unionize both firms and lift wages for all the programmers. If the unions negotiate a high-wage contract and unionized wages rise to $110 at both firms, how many of the 100 workers will have jobs?

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Number of Programmers per Firm 10 20 30 Robotron's MPL (S) 200 150 120 110 80 60 50 40 20 10 Korrexia's MPL (S) 110 80 60 50 50 60 70 80 20 10 100