A labor union can increase wages by exercising market power on behalf of workers.

Question

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A labor union negotiates with employers on behalf of workers, which gives them collective bargaining power. This bargaining power can be used to demand higher wages or better benefits, as the employers would be hesitant to lose their workforce to a strike or other forms of work stoppages. This effectively gives the labor union market power, which can lead to increased wages for unionized workers.

A Labor Union Can Increase Wages by Exercising Market Power