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ECS2604 Assignment 02 Semester 1 2023 Detailed Solutions
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ECS2604LABOUR ECONOMICS
ASSIGNMENT 02 2023
QUESTION 1
If one sector of the economy becomes unionised and there is a superior worker effect, then
a. wages will increase in the non-unionised sector.
b. wages will increase in the unionised sector.
c. wages may either increase or decrease in the unionised sector.
d. wages will remain unchanged in both the unionised and non-unionised sectors.
e. wages will be higher in the non-unionised sector compared to the unionised sector.
Superior worker effect – the higher wages paid by the union firms will cause workers to queue
up for the “good” union jobs. This will enable the employers to select the most productive
workers and, in time the firms will benefit.
The correct option is wages will increase in the unionised sector. Workers will join the
unionised sector from the non-unionised sector. This will enable the employer to select the
most productive workers. In such workplaces workers acquire higher skills rewarded by higher
wages.
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