Explain the monopsonistic discrimination, Microeconomics

Assignment Help:

The role of trade union to improve the lot of the workers is also important when there prevails the conditions of Monopsonisitc discrimination is said to prevail when the monopsonist pays different wages to the different workers. Monopsonisitc discrimination is quite in the actual world where workers are originated and where due to fear of unemployment that they have to accept the essential minimum wage. Under such circumstances, if the workers organise themselves  into strong trade unions, they can force the monopsonist to stop discrimination and pay the same wage to all the workers of a given type and thereby can reduce his excess profits earned because of discrimination.

In developed countries and well established industries, the organisations of labourers into powerful trade unions and thereby bargaining collectively with the employers, perfect Monopsonisitc discrimination has vanished. But group discrimination is meant the discrimination between different, groups and sections of the population. Thus for the same work women are generally paid lower wages than men in many countries. In some countries, coloured people are likewise paid fewer wages than white man for the same work. Boys are also sometimes paid smaller wages than men. The group discrimination can also by governmental action.

Trade unions and collusion among employers

Trade union can also pay a useful role in improving the wages of the workers without causing adverse effects on employment. This case which is intensely associated with the idea of monopsony is of “collusion among employers”. When there are few large firms competing for the same kind of labour they may realize that the increase in the demand for the labour by one firm may raise wages so that all of them have to pay the higher wage rate. If one firm offers a higher wage raise wages workers to itself from the other firms using the same type of labour the others too will have to raise the wage in order to keep the workers with them. Under such circumstances the firms will develop a strong desire to avoid any competition bidding for labour and spoiling the labour market. This may lead to open or tactic agreement among the firms not to raise wages.

But when there is collusion among firms not to raise wages, then the marginal productivity will not be even equalized with the marginal cost of labour. Under collusion among employers, the wage rate will be maintained at customary or agreed level even though the marginal revenue product of labour will stand higher than the wage rate paid. Although the firm can increase its profits by expanding employment to the point where the marginal revenue product equals marginal cost of labour, but in doing so the firm will have to increase the wage rate which is prohibited under collusion. Under such conditions of collusion, the formation of trade which workers can force the employers to pay the wage rate equal to the marginal revenue product of labour. Such a rise in the wage rate to the level of marginal productivity under pressure of trade union would not create any unemployment, because such a rise in the wage rate will only fill up the gap between the marginal revenue productivity and marginal cost of labour, and will not raise the latter above the former.

Furthermore, even in the case of oligopoly in the product market which is so extensively prevails in the capitalist countries, the increase in the wage rate by the trade union may be achieved without creating unemployment. It is generally believed that the oligopolist confronts a kinked demand curve corresponding to which revenue curve has a discontinuous or broken portion vertically below the kink.


Related Discussions:- Explain the monopsonistic discrimination

Analysis utility, difference between the cardinal analysis theory and ordin...

difference between the cardinal analysis theory and ordinal theory

Point elasticity, Point elasticity: It refers to measurement of elasticity ...

Point elasticity: It refers to measurement of elasticity on a point On a demand curve. Point elasticity helps in measuring elasticity where change in price and quantity is infinite

Comparative economics system, Identify path of growth and development to ec...

Identify path of growth and development to economic maturity.

The theory of demand :the utility approach, Prove that the utility approach...

Prove that the utility approach and the indifference curve approach yield the same consumer equilibrium.

Representative consumer faces a wage income tax, suppose, as in the federal...

suppose, as in the federal income tax code for the united states, that the representative consumer faces a wage income tax with a standard deduction. That is the representative con

Calculate the equilibrium price and quantity, Question: (a) The market...

Question: (a) The market demand schedule and market supply schedule for firm H is as follows: Q D = 500 - 10P Q S = -100 + 6P Where Q D and Q S denotes quantity de

Explain how a country can peg its currency, Explain how a country can peg (...

Explain how a country can peg (fix) its currency to another currency. Explanation of a pegged/fixed currency should centre on how the central bank uses the currency market mech

Bertrand paradox, Consider the following duopoly with differentiated goods ...

Consider the following duopoly with differentiated goods where x 1   and  x 2   denote the amounts of the goods 1 and 2  respectively, with prices p 1   and  p 2 . The demand funct

Essentials of Economics, Figure 3.7 in the above textbook. Using the figure...

Figure 3.7 in the above textbook. Using the figure in guide, determine the approximate size of the market surplus or shortage that would exist at a glance of a) $40 b) $20

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd