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The model tries to explain the possible existing relationships between labour market and trade unions. Starting from hypothesis of perfect competition, with work as the only production factor, the rising of forms of firm labour trade unions modifies the equilibrium in the wage levels and in the ratio employment-unemployment in the sense of an increase of the first and a diminution of the last.
Initially, firms and labour force distribute themselves randomly over the market: firms face an initial level of production and offer a basic wage, both common for the whole set. We need to remember that each company maximum hiring capacity is limited by the level of production, because this one is totally used to pay workers.
Population in working age looks for a job, and, as unemployed, they accept every wage offered. As the months pass, every worker (red turtles) develops an individual trade union level that contributes to form the firm trade union level: increasing the level in time, when it reaches determined thresholds, that can be seen as the moment of a new trade union request, firms have to change the wage offered to their employers. With the increase in the wage levels, firms compare their production to the new wage, sacking workers, if the previous labour cost exceeds the actual value of production, or hiring workers if the variation in wage permits to extend their number of employed. Sacked ones (green turtles), now, start again to look for a job, asking firms if they have possibility to employ.
Fundamental in the model are the thresholds and the corrispective requests: at the beginning, trade union reaches the first threshold and asks a low increase in wage, with respect to the initial one; further more the requests become increasingly larger, untill the last periods of trade union level evolution, when wage is relatively higher than the beginning and the will for an ulterior increase in wage levels is attenuate by the concern of new dismissals. When is reached a threshold and while approaching to the new one, contracts increase every month by the determined value at that level of trade union. The upper bound in trade union indicator implies the death of the firm. This happens because the exaggerated trade union level oblige the firm to operate in conditions of non competition: in order to mantein their capacity to stay on the market, they should pay an inferior wage, impossible here, given our hypotetical condition.
The "world" works as a continuum, with constant replacement in population (thanks to the birth of new labour force and the death, "retirement", of the elders), and growth in productivity, that allows the firms to increase their possibility to employ new workers.
Use the sliders to pick the initial settings for the model.
N.FACTORIES: allows the operator to decide the starting number of firms in the simulation, up to fifty firms. This value holds in time, even in case of disappearence of failed enterprises, thanks to the arise of new ones, in proportional number.
N.LABOUR_FORCE: it is possible to change the number of agents from 10 to 1000. Unlike what happens with factories, here the population in working age growths in time. This is due to the characteristics of workers: at the setting up, they sprout with a random age between 20 and 60 and has an average retirement age of 65. In the later stages, when new turtles are born, all of them assume the value of 20, as the age of entry in working world. What grants the growth is that every month two new agents enter into the world and begin to look for an occupation: anyway, population growth is not unending, but it come to a stabilization after xxx years.
INITIAL_WAGE: with this slider it is possible to modify the starting wage offered by all firms.
AVERAGE_PRODUCTIVITY_GROWTH and STD_DEV_APG: the operator can here vary the evolution of productivity in the market, for the whole set of factories: the average growth it is included between -1% and 1% for month, with a possible standard deviation that assumes the maximum value of 10% and allows to strongly differentiate the variability of production.
Two switches are also included, TRADE-UNIONS? and WAGE_IS_PRODUCTIVITY?, that give birth to four different scenery: the presence or not of trade unions, and the existence or absence of links between wage and productivity.
The most important dynamics, employment and unemployment rate and the average wage in the market, are examinated in separated plots; tied up with them, the monitors of labour_force, employment_rate, unemployment_rate and average_wage give at any time the exact value of the amount investigated. Obviously there are counters for the passing time, expressed in months, the basic cpunt unit, and in years, to facilitate the interpretation of the model
SETUP and GO buttons allows the operator to initialize the model's variables and to start the simulation.
It is interesting that every slider and switch can be modified during the progress of the model. Changing the number of firms and labour force in the world, it varies the effect in the long term on employment and unemplyment rate. Also an extrime high or low value in the initial wage determines different effects on the evolution of the simulation.
Try to change the four scenery at the beginning of the setting up and during the progression of the individual behaviours: what happens when trade unions appear in the market, what when they disappear? What happens if we do not anchor the wage to the productivity evolution: does it change in a singular way?
Try also to vary the casuality and the distribution in the productivity growth to see how different size of production are linked with the process of trade union rising and with the firms' life.
The model could be complicate by adding a reserve wage for each agent and so the possibility to choose if work at the condition proposed by the factories or, instead, wait untill wage level would rise. Other forms of interaction could be the diffusion to neighbor firms of wage or trade union conditions of firms with higher levels: this would accelerate the formation of new wage requests and the movements in employment/unemployment rate.
BRUCCHI LUCHINO (2001), Manuale di Economia del Lavoro, Il Mulino, Bologna.