Economics

Wage increases are essential for improving living standards, but when they outpace productivity or are widespread across the economy, they can contribute to inflation. The relationship between wage growth and inflation is complex, influenced by demand, supply, productivity, and policy responses. Economists closely monitor this link to balance fair income growth with price stability. 1. Cost-Push Inflation Occurs when rising wages increase the cost of production for firms. Firms pass these higher labour costs onto consumers in the form of higher prices.… Read more

Trade unions use a variety of methods to achieve their objectives of securing better wages, improved working conditions, and social justice for workers. These methods can be classified into peaceful, economic, and legal strategies depending on the situation and industrial environment. 1. Collective Bargaining The primary and most peaceful method used by unions to negotiate with employers on behalf of members. Focuses on wages, working hours, conditions, benefits, job security, and grievance redressal.… Read more

Trade unions and collective wage bargaining are powerful tools for promoting fairness, representation, and balance in the labour market. Beyond their role in negotiating wages and benefits, they serve as mechanisms to address inequality, protect workers’ rights, and influence social and economic policies. By empowering workers through unity, unions play a vital role in shaping more equitable workplaces and societies. 1. Reducing Wage Inequality Trade unions help narrow the wage gap between high- and low-income workers by pushing for standard wage scales and living wages.… Read more

Union wage bargaining is a key process in determining compensation and working conditions for employees represented by trade unions. The outcomes of such bargaining affect not only workers and employers but also the broader labour market and economy. These results can be both positive and negative, depending on the balance achieved between union demands and business sustainability. 1. Higher Wages for Unionized Workers One of the most direct outcomes is a rise in wages above market-clearing levels for union members.… Read more

Bargaining power refers to the ability of either the employer or employee (or their union) to influence wage outcomes in their favor during negotiation. The stronger a party’s bargaining position, the closer the agreed wage will be to their ideal level. Several economic, institutional, and social factors shape the balance of power in wage bargaining. 1. Trade Union Strength Unions with large memberships, high unity, and organizational capability have greater leverage in collective bargaining.… Read more

The Bargaining Theory of Wages suggests that wages are set through negotiation between employers and employees, rather than being strictly determined by supply and demand or marginal productivity. It highlights the role of relative bargaining strength in determining the final wage level, especially in environments where trade unions are active or labour markets are imperfect. 1. Key Concepts Wages as a Bargained Outcome: Final wages are agreed upon somewhere between what the employer is willing to pay and what the worker is willing to accept.… Read more

Trade unions play a significant role in shaping wage structures and working conditions through collective action. The Bargaining Theory of Wages explains how wages are determined not just by market forces, but also by the relative bargaining power of employers and employees—particularly when organized into unions. 1. What Are Trade Unions? Trade unions are organized associations of workers formed to protect and promote their rights and interests. Their primary functions include negotiating wages, improving working conditions, securing benefits, and advocating labour rights.… Read more

Trade unions are organized associations of workers formed to protect, promote, and advance their collective interests. These interests typically include fair wages, safe working conditions, reasonable working hours, job security, and access to benefits. Trade unions operate through unity and solidarity, giving workers a stronger voice in negotiations with employers and policymakers. 1. Objectives of Trade Unions Economic Goals: Secure better wages, bonuses, allowances, and improved working conditions. Job Security: Protect workers from arbitrary dismissal, downsizing, or unfair treatment.… Read more

In an ideal world, labour markets operate efficiently—wages adjust to clear supply and demand, and all workers find employment that matches their skills. However, real-world labour markets are far from perfect. Numerous imperfections create imbalances, restrict mobility, and prevent optimal allocation of human resources. 1. Asymmetric Information Employers and employees often lack complete information about each other’s capabilities, job conditions, or compensation expectations. This leads to poor hiring decisions, underemployment, or mismatched jobs.… Read more

While the Marginal Productivity Theory offers a foundational explanation of how factors of production are priced, it operates under ideal conditions that rarely exist in real-world markets. Several limitations reduce its practical applicability, especially in understanding labour markets and wage determination. 1. Unrealistic Assumptions Assumes perfect competition in both product and factor markets, which is seldom true. Ignores the existence of monopolies, monopsonies, and oligopolies that distort wage and input prices.… Read more