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

What do you meant by real gdp, Q. What do you meant by Real GDP? Real G...

Q. What do you meant by Real GDP? Real GDP:Value of total gross domestic product (which is, all the services and goods produced for money in the economy) adjusted for effects o

Determinants of social demand for education - externalities, Determinants o...

Determinants of Social Demand for Education - Externalities The state has several objectives of which welfare and development of the people are most important. Promotion of cu

Consumer Behavior, Ask questioThe difference between the present value of c...

Ask questioThe difference between the present value of cash inflows and the present value of cash outflows over a period of time is termed as Net Present Value. This is used for th

Indifference curve, explain the properties of indifference curve with the h...

explain the properties of indifference curve with the help of diagrams?

Service levels in supply chain management, Service levels in Supply Chain M...

Service levels in Supply Chain Management Consider that a finished product is made up of five inventoried component parts. If the service level were 90 per cent or 0.9 for eac

What are the policies of savings and investment - US Economy, Policies of S...

Policies of Savings and Investment Policies to make sure that savers get reasonable rates of return on their savings have the potential to boost savings rate. Comparing systems

Policies for technological advance, Policies for Technological Advance ...

Policies for Technological Advance Without better technology, increases in capital stock generated by investment rapidly run into diminishing returns. And without improvements

Describe the different views on development, Problem 1: (a) Explain the...

Problem 1: (a) Explain the common set of problems that developing countries usually face. (b) In your opinion, which of the problems described in part (a), are more signifi

Macroeconomics, The Wealth of Nations of Modern Economies When the federal ...

The Wealth of Nations of Modern Economies When the federal government uses expenditures to stimulate the economy, it changes not only the present but the future as well. Question

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