Authors libby rittenberg 771

Consider the case of bilateral monopoly illustrated in Figure 14.12 "Bilateral Monopoly" Over what range of wages will employment be higher than it would have been if there was a monopsony buyer of labor but no monopoly in the supply of labor? Case in Point: Unions and the Airline Industry Unions represent 60% of the nonmanagerial employees of U.S airlines And labor costs make up one-third of airline costs All employees have a stake in the success of the firms for which they work That is certainly the case for the major unions representing airline employees Both union leaders and airline management have much to gain from a relationship that benefits both employees and the airlines that employ them That sort of relationship has not always existed In 1981, for example, Continental Airlines hired Frank Lorenzo, an airline entrepreneur, to run Continental The airline had lost money the previous three years Mr Lorenzo promptly abrogated Continental’s contracts with employees, and told them that they could go back to work but only at sharply reduced wages Continental’s pilots, flight attendants, and ground crews declared strikes against the airline The airline was able to break the strike by hiring replacement employees Even so, Continental declared bankruptcy in 1983 Mr Lorenzo told striking employees that they could return to work, but they could so only by agreeing to work at half their previous wage Continental’s strategy of union suppression achieved reductions in wage costs, but those savings had a cost as well A demoralized labor force produced dramatic reductions in the quality of service, and Continental was back in bankruptcy in 1991 In 1986, 6,000 members of the Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 771