Labour Market and Market Power
ENCYCLOPEDIA OF POLITICAL ECONOMY, Phillip O'Hara, ed., Routledge Publishing, pp. 643-645, 2000
Posted: 22 Jan 2010
Date Written: 2000
The extent to which market conditions effects workers' abilities to influence their conditions of work, including wages, has been much considered by many economists in the last three centuries. The conventional economic view has been that conditions of work are largely determined by the forces of demand and supply. Under these conditions workers' power is only strong if the is a labour shortage. Therefore the introduction of minimum wage legislation and other unionisation of labour is considered to have net negative effects on the economy. However, empirical evidence suggests that minimum wage legislation and trade unions have not had the negative effects predicted. Recent work on efficiency wages and X-efficiency support the empirical evidence and suggest that improved working conditions improve productivity and hence workers can improve their working conditions without negatively impacting on the firm or the economy.
Keywords: Labour market, Wages, Work conditions, Bargaining, Demand, Supply, X-efficiency, Legislation
JEL Classification: J40, J22, J23
Suggested Citation: Suggested Citation