Labour Unions

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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 business ...

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