The fact that a company was able to hire a large number of replacement workers at a wage significantly lower than the union wage suggests that, at that time, the union wage was set below the market-clearing equilibrium wage for that type of labor.
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A manufacturing firm is in the midst of a labor strike, with unionized workers demanding a wage increase. The firm responds by successfully hiring a full staff of non-union replacement workers at a wage 25% lower than the pre-strike wage. What is the most direct economic implication of the firm's ability to find these replacement workers at the lower wage?
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The fact that a company was able to hire a large number of replacement workers at a wage significantly lower than the union wage suggests that, at that time, the union wage was set below the market-clearing equilibrium wage for that type of labor.
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A manufacturing firm is in the midst of a labor strike, with unionized workers demanding a wage increase from their current $25 per hour. The firm responds by successfully hiring a full staff of non-union replacement workers at a wage of $18 per hour. What does the firm's ability to find these replacement workers at a lower wage most strongly indicate about the labor market at that time?
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