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posted by martyb on Friday January 19 2018, @12:06PM   Printer-friendly
from the Invisible-hand dept.

Found this interesting, you may too.

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


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  • (Score: 4, Insightful) by Thexalon on Friday January 19 2018, @05:37PM (1 child)

    by Thexalon (636) on Friday January 19 2018, @05:37PM (#624787)

    They know that they can't really control the probability of a good hire vs an empty paycheck.

    You're right that they can't completely control that risk.

    What they can do, and what your thinking leaves out, is fire the empty paycheck as soon as it becomes clear they're an empty paycheck. Yes, I realize that's a pain in the butt, but failing to fire bad employees is part of how a good department turns into a bad department. And if asked to justify it, answers like "This person has written 10 lines of code in the last month, and completed zero change requests" is a pretty compelling answer.

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    The only thing that stops a bad guy with a compiler is a good guy with a compiler.
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  • (Score: 3, Insightful) by meustrus on Friday January 19 2018, @05:51PM

    by meustrus (4961) on Friday January 19 2018, @05:51PM (#624793)

    That requires managers to have even a basic idea of what is going on in their engineering department. Unless the manager is technically oriented (in which case the hiring problem is greatly reduced), getting involved even at the level of trying to fire non-performers tends to hit the wrong people or otherwise damage the quality of the team.

    Besides which, managers are doing well when they have more people working for them, not less. When their managers don't understand engineering, which is even more likely than the lower manager not understanding it, paying for a bunch of non-performers really just looks like the work is difficult. The manager will find ways to justify why he needs a larger budget.

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