Question

Suppose there are two groups of workers, unionized and nonunionized. Congress passes a law that requires all workers to join the union. What do you expect to happen to the wage rates of formerly nonunionized workers? Of those workers who were originally unionized? What have you assumed about the union's behavior?

Short answer

It is expected that the wage rates of formerly nonunionized workers would increase, while the wages of originally unionized workers could either increase or remain the same, depending on the union's negotiating power. It is assumed that the union's behaviour is to negotiate for higher wages.

Step-by-step solution

Understanding the Impact of Unions on Wage Rates

Unions generally work to increase the wage rates of workers by negotiating on their behalf. Therefore, if all workers are required to join the union, it might be hypothesized that the wage rates of formerly nonunionized workers would increase due to collective bargaining power.

Predicting Changes in Wage Rates for Unionized Workers

For workers who were already in the union, their wage rates could change depending on a variety of that. If the union negotiates a higher base wage for all workers, the workers who were originally unionized could also see their wages increase. However, if the union only negotiates a base wage that is equivalent to the original wage of the unionized workers, their wage rates may stay the same.

Assumptions about the Union's Behavior

Lastly, based on the analysis, it is assumed that the union negotiates higher wages for its workers. However, this is just a hypothesis as the actual behavior of the union could vary.