Consider an economy with only two sectors: manufacturing and service. Both sectors are perfectly competitive, and labor is homogeneous. Assume that changes in the labor market do not affect the product demand curve in either sector. Suppose a union forms in the manufacturing industry. The union limits its membership to fewer than the number of workers employed before the union formed and forces all employers in the industry to hire only union workers.
Show the effect of unionization on the labor market or the service industry.

The unionization would create a gap of access to opportunity between laborers and no laborers. Creating three social classes. The no laborers in the lowest of the social stratification category, the workers in the middle, and the leaders of the union as well as the business owner on top, performing the decisions and the distribution of wealth.

Explanation:

The effect of unionization on the labor market would create a bias in the labor market because only the member of the union would be hired. Due to the abuse of power, the union would execute on the businesses. So it would become corrupt, it would also develop a gap in the access to an opportunity from the workers to the no workers and finally would cause two different classes one privileged and one abused.

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