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Unions and Labor Market
The Congress of industrial Organizations (CIO) was formed in 1938 which was
composed mainly of industrial unions, such as automobile industry and steel industry, but prior
to the formation of the CIO, most labor organizations were craft unions. Unions attempt to
monopolize the labor supplies to a company or an industry. Unions argue that they can raise their
members’ wages by restricting the specific labor supply so that the employers have to pay high
wages. If the employers accept raising the wages, then they will earn lower profits, or just pass
on those higher wages to consumers through higher prices.
A labor demand curve shows the number of workers employers are willing and able to
hire at different wages. As a rule, a firm will hire a worker only if the additional revenue it gets
from doing so covers the additional cost. For example, in the fishing industry, worker’s original
