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Economics IGCSEPDF 66
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● E: The importance of non-wage factors varies between individuals; a young worker
might prioritise training (non-wage), while a worker with a family might prioritise high pay
(wage).
Q3: Impact of a Strong Trade Union on the Economy (8 Marks)
Point 1: Workers and Equity
K:
A strong union uses collective bargaining power to push the wage rate above
the market equilibrium.
This is beneficial for workers, as it increases their real incomes, helping to
reduce income inequality and potentially boosting consumption and aggregate
demand in the economy.
An:
Point 2: Firms and Costs
K:
The higher wages and improved benefits forced by a strong union increase a
firm's costs of production.
An:
This is a disadvantage for firms, as it reduces their profitability and may force
them to raise prices (contributing to cost-push inflation) or reduce investment.
Point 3: Government and National Output
K:
If the union uses industrial action like a strike, it halts production in that
industry.
This reduces the nation's output (GDP) and can damage the economy's
international competitiveness if the higher costs make exports more expensive.
An:
Evaluation:
○ The overall impact
depends on the increase in productivity
. If the union's
actions encourage better training and the wage rise is matched by an increase in
worker productivity, the economic effect is largely positive (lower average costs
and higher output).
○ If the wage rise is not matched by productivity, the negative effects of inflation
and unemployment will dominate, making the impact detrimental to the economy.
3.5 Firms
This section covers the objectives of firms, different forms of business organisation, and firm
growth.
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