Unions tend to increase the disparity in pay between insiders and outsiders by

a. increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.
b. increasing the demand for workers in the unionized sector.
c. decreasing the demand for workers in the unionized sector.
d. increasing the wage in the unionized sector, which may create a decrease in the supply of workers in the nonunionized sector.

1 answer

The correct answer is:

a. increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.

Unions typically negotiate higher wages and better working conditions for their members in the unionized sector. As a result, there can be a disparity in wages between unionized and non-unionized workers. Higher wages in the unionized sector may lead to a decrease in the available labor supply for non-unionized jobs, as workers might prefer the higher-paying unionized positions, thereby increasing the wage gaps between the two sectors.