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

Indifference curve, What is indifference curve and its properties?

What is indifference curve and its properties?

Why is the concept of scarcity relevant to both ldc and mdc, Why is the con...

Why is the concept of scarcity relevant to both LDC s and MDC s? All societies throughout time have wrestled with the basic economic conundrum of having needs that cannot be me

FISCAL POLICY, HOW DO YOU ADJUST FISCAL POLICY FOR INTERNAL BALANCE

HOW DO YOU ADJUST FISCAL POLICY FOR INTERNAL BALANCE

Impact of government legislations on business, Impact of government legisla...

Impact of government legislations on business in india Government in India plays a dominant role in the Indian business activity. It directs and regulates the private business and

Illustrates stages of production of an economic conclusion, Illustrates the...

Illustrates the stages of the production of an economic conclusion? The production of an economic conclusion generally goes into three stages as follows: Stage 1: It is no

Illustrate the economic growth, Illustrate the Economic Growth Up until...

Illustrate the Economic Growth Up until 1800 growth rates of human populations were glacial. Population growth between 5000 B.C. and 1800 averaged less than one-tenth of a perc

Organic chemistry, methylcyclohexene + HI by the catalyst of H3PO4

methylcyclohexene + HI by the catalyst of H3PO4

Microeconomics, determinants of demand and determinants of supply

determinants of demand and determinants of supply

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