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A new research paper that may help unlock the mystery of why Americans can't seem to get a decent raise. Economists have struggled over that question for years now, as wage growth has stagnated and more of the nation's income has shifted from the pockets of workers into the bank accounts of business owners. Since 1979, inflation-adjusted hourly pay is up just 3.41 percent for the middle 20 percent of Americans while labor's overall share of national income has declined sharply since the early 2000s. There are lots of possible explanations for why this is, from long-term factors like the rise of automation and decline of organized labor, to short-term ones, such as the lingering weakness in the job market left over from the great recession. But a recent study by a group of labor economists introduces an interesting theory into the mix: Workers' pay may be lagging because the U.S. is suffering from a shortage of employers.
[...] argues that, across different cities and different fields, hiring is concentrated among a relatively small number of businesses, which may have given managers the ability to keep wages lower than if there were more companies vying for talent. This is not the same as saying there are simply too many job hunters chasing too few openings—the paper, which is still in an early draft form, is designed to rule out that possibility. Instead, its authors argue that the labor market may be plagued by what economists call a monopsony problem, where a lack of competition among employers gives businesses outsize power over workers, including the ability to tamp down on pay. If the researchers are right, it could have important implications for how we think about antitrust, unions, and the minimum wage.
Monopsony is essentially monopoly's quieter, less appreciated twin sibling. A monopolist can fix prices because it's the only seller in the market. The one hospital in a sprawling rural county can charge insurers whatever it likes for emergency room services, for instance, because patients can't go elsewhere. A monopsonist, on the other hand, can pay whatever it likes for labor or supplies, because it's the only company buying or hiring. That remote hospital I just mentioned? It can probably get away with lowballing its nurses on salary, because nobody is out there trying to poach them.
[...] Harvard University labor economist Lawrence Katz told me that he suspected the findings about market concentration and wages were directionally correct but that they may be a bit "overstated," because it's simply hard to control for the health of the labor market.
"They are getting at what is an important and underexplored topic ... using a creative approach of using really rich data," he said. "I don't know if I would take perfectly seriously the exact quantitative estimates."
Still, even if the study is only gesturing in the direction of a real problem, it's a deeply worrisome one. We're living in an era of industry consolidation. That's not going away in the foreseeable future. And workers can't ask for fair pay if there aren't enough businesses out there competing to hire.
Article summarizing study:
Why Is It So Hard for Americans to Get a Decent Raise?
Actual study (limited access): http://www.nber.org/papers/w24147
FYI: Number of companies on America's stock exchanges has decreased by 50% since 1998
(Score: 5, Insightful) by crafoo on Friday January 19 2018, @02:46PM (16 children)
I know you are being sarcastic and I agree with your sentiment. However, the barriers to starting a small 1 to 5 person company and competing are huge, almost insurmountable. Regulatory capture is a real issue (bribing to write the laws to benefit large corps). But yes, we have also taken our local and federal laws too far. Unnecessary paperwork and bureaucratic oversight is a serious issue. Most of this is just welfare for non-productive people who can't cut it on their own, so they must leach off of everyone else getting paid as a government bureaucrat. Also, yes, let's talk about tax law. It's insane. It's crushing for small businesses. I wouldn't be so quick to scoff at the article. I think they are on to something.
(Score: 1, Interesting) by Anonymous Coward on Friday January 19 2018, @03:32PM (2 children)
This was pretty much my first thought. We've got huge regulatory burdens that the big companies love because it makes it so hard to start up any competitor. Most of the US regulatory structure is set up this way (and see TBTF banks for a terminal version of the issue) and there's not much being done about it. Even Trumps "two regulations out for every one added" is barely in the ballpark, since it's easy to game that system by making fewer but much longer and more detailed regulations.
Wonder if these researchers bothered to plot their data against the length of the Federal Register...
(Score: 1, Insightful) by Anonymous Coward on Friday January 19 2018, @05:34PM (1 child)
It's an arms race. If big business was not mercilessly and ruthlessly gaining from edge cases and loopholes, then govt would not have to add more rules.
I mean, in what universe is it common sense to funnel money through the Camen Islands via the Netherlands and into Ireland to avoid taxation in the USA? It's the equivalent of hacking computers to encrypt your hard disk. If you didn't want that, then surely you wouldn't have allowed it to happen right?
(Score: 1, Insightful) by Anonymous Coward on Friday January 19 2018, @08:16PM
Well, it is currently an arms race, but it doesn't have to be. The bigger and more complex the rule-set, the easier it is to game. Slimming it down to more basic rules would help, but the entrenched bureaucracy doesn't function well in those kind of situations. The prefer tons of bright-line laws they can auto-pilot to rather than need to think about and evaluate.
(Score: 5, Insightful) by GreatAuntAnesthesia on Friday January 19 2018, @03:58PM (1 child)
I wasn't scoffing at the article, I was scoffing at the idiots who genuinely think that what I posted is the correct response to the article.
Also, if you look closely that I mentioned "regulations" and "regulatory capture" separately. I did this because while I acknowledge that regulatory capture is bad, I don't see it as a reason to get rid of ALL regulations. There is a sweet-spot between "can't tie your laces without filling in an environmental impact assessment" and "zero rules corporate cagefight to the death".
Baby, bathwater.
(Score: 4, Insightful) by Azuma Hazuki on Friday January 19 2018, @09:25PM
Most of the people who can say "regulatory burdens harm big corporations" with a straight face are too stupid or too evil to handle that kind of nuance. It's frustrating as hell, isn't it?
I am "that girl" your mother warned you about...
(Score: 5, Insightful) by Gaaark on Friday January 19 2018, @04:06PM (5 children)
Only thing is: they're just realising this now?
They couldn't see that the disappearance of the small mom and pop joints in favour of mea-corps was bad? Let's INCREASE COMPETITION!!...between these 2-3 big corps who, by the way, have colluded to keep prices artificially high. WE'RE GREAT!!
Dismantle big corps, increase competition and take corporate donations out of politics and keep personal donations to, say, $100.
Bring politics back TO the people, FOR the people! (And no, corporations are not people).
--- Please remind me if I haven't been civil to you: I'm channeling MDC. ---Gaaark 2.0 ---
(Score: 1, Insightful) by Anonymous Coward on Friday January 19 2018, @05:37PM (2 children)
I can't believe I agree with one of the resident wingnuts. You're a fucking dick for ruining my 100% record of disagreeing with everything you say.
(Score: 2) by Gaaark on Friday January 19 2018, @05:48PM
And YOU get ONE Internet Insightful! for realizing a dick is not always a dick. Yay! :)
--- Please remind me if I haven't been civil to you: I'm channeling MDC. ---Gaaark 2.0 ---
(Score: 3, Insightful) by Azuma Hazuki on Friday January 19 2018, @09:26PM
The truth is the truth, no matter who says it. Genetic fallacy may be the biggest problem for most Americans' ability to process information.
I am "that girl" your mother warned you about...
(Score: 1) by Gault.Drakkor on Friday January 19 2018, @08:45PM
Mere price collusion should be remedied by new players. If there are no new players, then what is stopping them?
Pretty sure its mostly caused by high barriers to entry. ( natural monopolies, regulatory capture, monopoly extension to other sectors)
So the answer is not to indiscriminately dismantle the corps.(Look how well that worked for the case of Ma Bell.)
The answer is to identify the barrier(s) to entry and remove those.
In the case of telecoms it's the hardware network, the frequency allocations. Pull all that into utility companies that are state/public owned. Mandate that service provision, infrastructure must be handled by separate independent entities.
With that separation then there are lower barriers to entry for service providers, and thus much easier to have meaningful competition.
(Score: 2) by Joe Desertrat on Sunday January 21 2018, @10:54PM
This would require government regulation.
(Score: 3, Insightful) by Thexalon on Friday January 19 2018, @05:23PM (3 children)
It varies a great deal depending on what kind of business you're trying to start.
For example, in a relatively unregulated business like, say, software development or floral arranging, all you need to do to start a company is hang out the proverbial shingle and start selling services, and you're officially a sole proprietorship. You can get bank accounts and such as a sole proprietor if you like. If you want to formalize things a bit and limit your liability, fill out the forms from your state government and pay a fairly small fee (in my state, it's somewhere around $50) and become an LLC. And at that point, you're a business owner, congratulations. The main limits on your growth at that point are (a) acquiring customers, and (b) keeping them happy, which I'll admit are challenges but not because of anything the government did.
If, on the other hand, you're trying to get into a tightly regulated business, like restaurants and heavy industry, then yes, you need to jump through more hoops. Some of those hoops are due to regulatory capture, but some of them exist for very good reasons, like preventing thousands of people sick from food-poisoned sushi or workers getting killed due to unsafe work environments.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by sjames on Friday January 19 2018, @06:17PM (1 child)
You forgot the business license. If you actually hire an employee, you'll need to withold taxes and issue a W-2. You'll need to collect and submit sales tax and make sure to keep a record of sales if you're audited. Even if you have a calculator and aren't afraid to use it, you may need a CPA to make sure you don't have tax trouble.
(Score: 3, Insightful) by Thexalon on Friday January 19 2018, @07:31PM
Again, there are many businesses that don't need a license.
Yes, you either need to keep track of your income and expenses, or hire somebody else to do it. And you need to pay taxes on that income or expense as well - nothing new there. My experience is that this is far from the biggest hurdle to being in business. Ditto for my step-brother, who owns a pet supply/services store: The government is not his biggest problem, not by a long shot.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Friday January 19 2018, @08:24PM
Funny you mention floral arrangement...
https://www.washingtonpost.com/opinions/a-license-to-be-a-florist-how-occupational-rules-can-be-a-burden-on-workers/2015/08/06/212ad5b6-3abb-11e5-9c2d-ed991d848c48_story.html [washingtonpost.com]
(Score: 5, Insightful) by JoeMerchant on Friday January 19 2018, @06:01PM
I had a friend who drove big trucks and excavators for a living. He summed up the free market from his perspective very succinctly: "Truck drivers are idiots. They're all out there undercutting each other just to get a job and they cut their profit margins so thin that they end up losing money when anything out of the ordinary costs them extra, and even sometimes when everything goes right." I believe Uber has honed in on this failing in common persons' business sense to take advantage of people who drive their own vehicles for the service. It's all well and good to say "the market will prevail, eventually enough truck/Uber drivers will bankrupt that supply decreases and prices will rise to a sustainable level," but... is it really guaranteed that rates will rise, or will these self-managed businesses continue to create a continuous stream of idiots in default on their debts / bankruptcy? And, who foots the bill for bankruptcies? Everyone else who isn't declaring bankruptcy, that's who.
So, we've got small businesses trying to compete with big businesses on a slanted playing field, and we've also got big businesses taking advantage of independent contractors who don't know any better than to work for free (long term.) It's not surprising at all that the bigger businesses, with surplus manpower and funds, can lobby the legislatures to slant the competitive landscape in their favor.
🌻🌻 [google.com]