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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 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.