Given the information in Problem 28-17, how much more or less do the firms in this industry spend, in total, on the labor employed each hour as a consequence of establishment of the union wage W = $40 per hour above the equilibrium wage W.= $30 per hour?

Problem 28-17

In Figure 28-9, suppose that W_e, is a wage rate of $30 per hour, and W_U is a wage rate of $40 per hour. In addition, Q_D is 12,000 workers per hour, Q_e, is 15,000 workers per hour, and Q_s is 18,000 workers per hour. If each worker hired corresponds to a job available within the unionized industry, how many jobs must the union ration at the wage rate W_U? What is the shortage of jobs?

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FIGURE 28-9 Unions Must Ration Jobs The market clearing wage rate is We at point E, at which the equilibrium quantity of labor is Qe. If the union succeeds in obtaining wage rate Wu. the quantity of labor demanded will be Qp, at point A on the labor demand curve, but the quantity of labor supplied will be Qs, at point B on the labor supply curve. The union must ration a limited number of jobs among a greater number of workers. The surplus of labor is equivalent to a shortage of jobs at that wage rate. Wage Rate per Hour WU We E B S D QD Qe Qs Quantity of Labor per Time Period