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

Elasticity of demand , The Bushman Cinema is the only movie theatre locate...

The Bushman Cinema is the only movie theatre located in the medium-size country town of Sleepy Hollow.  The owner wants to charge an admission fee of $10 per seat and past experien

Organic protons and electrons, Organic biochemistry is really as well as bi...

Organic biochemistry is really as well as biochemistry. This is because the as well as atom is the central source of all existing creature's substances. 8 protons and 8 electro

Long term microeconomics, Igora''s pizzeria want to know if it should stay ...

Igora''s pizzeria want to know if it should stay open this spring. Total Revenue will be $ 12,000 per week and Total Cost will be $ 18,000 per week. The fixed cost of running the b

What is the difference between concept and assumption, What is the differen...

What is the difference between 'concept' and 'assumption'?  These two terms are very dissimilar. The term 'concept' refers to an idea or abstract principle. For instances, forc

Increasing returns to scale and decreasing returns to scale, Increasing ret...

Increasing returns to scale and decreasing returns to scale: Increasing returns to scale occur when increases in all inputs by a certain percentage cause a relatively higher p

Implications of privatisation for a small island economy, Question 1: (...

Question 1: (a) The Mauritian government is now increasingly involving the private sector in the development of the economy. How can government support effective private secto

A mixed economic system solves basic economic problems, Why do some people ...

Why do some people believe that a mixed economic system solves basic economic problems?  Ans) It is due to  the private sector and public sector both have a say in answering the

Explain capital adequacy, Q. Explain Capital Adequacy? Capital Adequacy...

Q. Explain Capital Adequacy? Capital Adequacy: Capital adequacy rules are loose regulations which are imposed on private banks, in hope of ensuring that they have adequate inte

Draw and label demand curve for a cup of coffee for consumer, Suppose the d...

Suppose the demand curve for a consumer for coffee is: Q = 6 - 2P, where Q represents the number of cups per day and P is the price of coffee per cup.  1.  Suppose the con

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