Suppose that the objective of a union is to maximize the total dues paid to the union by its membership. Explain the union strategy, in terms of the wage level and employment level, under the following two scenarios.
a)Union dues are a percentage of total earnings of the union membership.
b)Union dues are paid as a flat amount per union member employed.
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a) In the scenario where union dues are a percentage of total earnings of the union membership, the union's strategy would revolve around maximizing the total earnings of its membership. This can be achieved through negotiating higher wages for union members.
The higher the wages, the greater the total earnings of the members, and consequently, the higher the amount of union dues paid. Therefore, the union would aim to secure higher wages for its members, which would result in a higher percentage of earnings being contributed as union dues.
However, it's important to note that the strategy of maximizing total earnings should be balanced with the potential impact on employment levels. If the union demands excessively high wages, it may lead to higher labor costs for employers, which could incentivize them to cut down on employment levels. So, while seeking higher wages, the union should take into consideration the employment levels and the overall economic viability of the industry.
b) When union dues are paid as a flat amount per union member, the union's strategy would be to maximize the number of employed union members. The more members employed, the greater the number of dues paid to the union.
To achieve this, the union would focus on increasing the demand for labor within the industry. Higher demand for labor would result in more employment opportunities, leading to an increase in the number of dues-paying union members.
To increase labor demand, the union might negotiate for favorable working conditions, such as shorter work hours, better benefits, or improved workplace safety. These improvements would make the industry more attractive to potential employees and encourage employers to hire more workers, thereby increasing the number of union members and the total dues paid to the union.
In summary, the union's strategy under both scenarios would be to maximize either the total earnings of its members or the number of employed union members, depending on how the dues are calculated. It's crucial for the union to find a balance between achieving its goals and considering the potential impacts on employment levels and the overall health of the industry.