Labor Unions

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small portion of the total costs of production, so that a
rather large increase in wages would generate only a small increase in the
price of the product. Third, the supply of factors that can be used as
substitutes for union labor, such as nonunion labor or labor-saving
machinery, should be inelastic, so that their price rises substantially as
more units are employed. Fourth, the ability of these factors to
substitute for union labor should be highly limited; it would be hard to
substitute for workers with very high skil! ls or skills that are highly
specific to a single employer.

Numerous studies have been made to estimate the extent to which unions in
the United States have raised the wages of their members above what they
would otherwise have been. These studies show substantial differences in
the effectiveness of different unions, and that is in the spirit of
Marshall's analysis. Substantial variation has also been found in the
effectiveness of unions over the course of ...

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