Bargaining power and wage determination
Even in the absence of collective bargaining, workers do have some bargaining power that allows them to receive wages higher than their reservation wage. Each worker's bargaining power depends both on the nature of the job and on the economy-wide labor market conditions. Let's consider each factor in turn.
a. Compare the job of a delivery person and a computer network administrator. In which of these jobs does a worker have more bargaining power? Why?
b. For any given job, how do labor market conditions affect a worker's bargaining power? Which labor-market variable would you look at to assess labor-market conditions?
c. Suppose that for given labor-market conditions [the variable you identified in part (b)], worker bargaining power throughout the economy increases. What effect would this have on the real wage in the medium run? in the short run? What determines the real wage in the model described in this chapter?