Maynard, M. (2002, November 21). United and machinists reach deal on concessions. New York Times Online. Retrieved from the Internet on 2002-11-21 at: http:// www.nytimes.com/2002/11/21/business/21AIR.html?
Section One: Economic Concept Discussed in Article
This article reports on the tentative agreement reached between UAL Corporation (whose primary operating company is United Airlines) an the International Association of Machinists, which represents 37,500 employees at United Airlines, and which holds a large proportion of the equity stock in UAL Corporation. The company has been negotiating with each of its employee groups to gain payroll concessions to reduce the costs of operation so that (hopefully) the company will qualify for a federal government loan that will allow the company to avoid bankruptcy. An essential economic concept that is discussed in the article is collective voice and institutional response, in other words, labor-management relations wherein labor is represented by unions acting under collective bargaining agreements. In this article, the labor union involve was the International Association of Machinists, however, the company also negotiates with three other labor unions.
Section Two: Economic Theory Involved
While the economic concept that is prominent in this article is collective voice and institutional response, the application of the theory of supply and demand generally, and aggregate demand and supply more specifically, is necessary to under the situation reported in the article. Table 2, on the following page, illustrates the aggregate demand and aggregate supply relationships.
Both the company and the union appear to be approaching the problem reported in the article as if the problem is temporary. In fact, however, changes in the airline industry (hat began before the terrorist attacks on 11 September 2001 and which have accelerated since that time) may represent much more than a ...