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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: 2, Interesting) by Sulla on Friday January 19 2018, @06:13PM (6 children)
Globalization and easy immigration means that modern employees have to compete on more equal terms with folks oversees who are okay making less. The only ways you combat this are to have high sanctions on foreign goods or limit immigration or both. High sanctions will mean that low paid manufacturing and farm workers in the US will be able to compete with foreign workers easier, and a sequester on immigration means that high educated workers will have an easier time competing with foreign workers. Until 1965 the bulk of US immigrants came from Europe where the standard of living and expectations out of life were pretty similar to our own, the Hart-Cellar Act ended the quota system and took immigrants from all over.
As far as competition goes, I can compete with someone with a similar education cost and life expectations to my own. In general I can probably compete pretty okay with someone from South Korea, Japan, or most of Europe. I would have a hard time competing with someone from India or China who has two or three degrees for less than the price of my one, is willing to work for less, and is willing to work longer hours. As far as manufacturing and farm workers now a farm worker needs to compete with less than minimum wage unless they want to travel a county over to do farm hand work (I keep seeing articles where Napa Valley wants to pay 21/hr for farm labor, but nobody can afford to live nearby and would lose a ton of money on transportation). Manufacturing workers need to compete directly with foreign workers, pretty hard for a union worker capped at 8 hours a day making 24/hr with defined breaks and safety regs can compete with a foreign worker making .24/hr working 12 hour shifts with no breaks or safety. Everyone would prefer be a worker in the US, but nobody can afford to buy the US goods unless a tariff is put on the foreign goods making them competitive. We chose the path of globalization, which means less manufacturing, cheaper farm labor, and cheaper high tech labor.
In the short run immigration greatly helps the industrialist and hurts the common man. Globalization is allowing an equalization of all workers, to make up for the artificially high standard of living in the US and Europe the standard of living must fall to make room for the rest of the world to come up. Yes the whole is greater than the sum of its parts and increasing the worlds standard of living will bring everyone up, that is how it was sold afterall, but in the short run (40-50 years?) we are seeing the west stagnate and stumble to make room for everyone else.
The generation of the boomers chose to martyr the west to save the rest of the world and help them get a foot up by sacrificing the next several generations of Americans, I only wish the boomers would live long enough to see the consequences of their actions. Sadly they wont, they will live out their days in nice retirement homes collecting their pensions and social security that won't exist for their kids and grandkids.
Ceterum censeo Sinae esse delendam
(Score: 4, Interesting) by JoeMerchant on Friday January 19 2018, @06:16PM (5 children)
Another way to survive globalization is to be highly skilled in a field where the workers contribute tremendous value to the company.
Even if overseas workers with similar skills might do the job for 1/2 pay, do you really want to mess around trying to save $120K/yr using global sourced workers when a delay of a few months costs millions?
🌻🌻 [google.com]
(Score: 1) by Sulla on Friday January 19 2018, @07:18PM (4 children)
Valid point. I have concern about all those who have trouble doing anything but using a drill press or pushing something on down the assembly line. For those that are capable to learn and grow the world holds endless possibilities, but what do we do about that group that has a hard time learning or lack in ability? Seems to me our options are to either become less open as a country to protect them, or initiate a basic income to cover the gap. Yeah sure its selfish to go with tariff/less immigration but it not only helps the very lowest in our country but it helps the middle workers as well, we can continue to bring in high end talent as necessary. The basic income solution seems bad because it would allow people to drop out completely and not work rather than a well built safety net that catches them then sends them back out to work. Some people will be unwilling to do anything but sit there on basic and I don't like the idea of those who are able/willing needing to work harder to support those that aren't.
Ceterum censeo Sinae esse delendam
(Score: 4, Interesting) by JoeMerchant on Friday January 19 2018, @07:43PM (3 children)
I question whether the world is really better off trying to get everybody "working" productively. I see plenty of people in big organizations who are clearly just counterproductive by nature. If those kind of people had UBI, they might be able to put their counterproductivity to positive use by auditing our politicians or public works projects, exposing graft, corruption and inefficiencies in public projects which should, by all rights, be transparently accountable to the taxpayers who fund them...
And, as for lower skilled workers - I'd much rather deal with an automated checkout line than wait for a surly human being who doesn't want to be there to run the same register for me, and I definitely prefer my mass produced products like cars to be welded by a robot than attempting to train a human to be sufficiently robotic to get a good weld every time, hundreds of times a day, year after year. If some of these people end up "dropping out" and taking up smoking weed and painting while on UBI, is that really a net-loss to society? When all the jobs that need doing are getting done, it shouldn't matter if they're being done by man or machine. And, when the people are out of work, if you supply them with food, shelter and a little discretionary income, then they have no primal instinct reasons to rob, steal, etc. Not saying there won't be troublemakers on UBI, but I think most people who are receiving a decent UBI would far rather continue to receive it, instead of being sent to West Texas to break rocks (or build a wall) because they decided to make trouble with their spare time.
I can't seem to get away from the overpopulation issue... that's the one flaw I see in all systems currently in place, and most systems proposed. Sure, the wealthy people in wealthy countries have rolled back to negative population growth - but the world at large is still growing too fast (probably already grown too large), my chosen home in Florida has been increasing in population right along with the world average rates, and to see what that has done here in the last 50+ years is just frightening, thinking about that happening to the whole planet. Sure, sure, there's lots of "empty" space, but is it good, productive, biologically desirable empty space? So, the main problem I see with UBI is an implicit incentive to take time off and have a bunch of children... that's nothing particularly special about UBI, it has to be addressed better no matter what the "next thing" is, but it's pretty easy to see how UBI would make having more than 2 kids per couple seem not as bad as it does today.
🌻🌻 [google.com]
(Score: 1) by Sulla on Friday January 19 2018, @08:21PM (2 children)
As we see with the developed vs undeveloped world now with the population boom lag/boom, would we see the same thing with working/basic? The less educated tend to have more kids, if the less educated are also on basic how long is the system sustainable? There will be a subsection of those born to households on basic that will want something more, but will it outweigh those who don't? Wondering your opinion on this.
Ceterum censeo Sinae esse delendam
(Score: 4, Insightful) by JoeMerchant on Friday January 19 2018, @09:09PM (1 child)
I don't think there is a popular solution to population control. If the right to reproduce, early and often, can somehow be converted to a privilege... that would work. As you say, it is often those least capable of providing for children who have the largest number of them, so we have a sort of explosive control system problem: as long as everyone is wealthy/educated, then population seems like it will be naturally controlled, but... when you have a bunch of people who are poor and/or uneducated, then you have rapid population growth - which, given limited natural resources, seems like the road to greater poverty.
I find it, ironic?, that China continued to grow under their "one child" policy, clearly there were more exceptions than followers there, although they did at least manage to slow growth, so that's some measure of success. The disproportionate number of male children is, on the one hand fortunate for future population control, and on the other a kind of sad outcome for those extra men.
My sense of fair says something along the lines of: everybody is born with the right to father/mother one biological child of their own. If you remain on UBI your whole life, that's it. If you work for income, pay taxes, and provide enough tax to the system to cover a lifetime's UBI for another person, that should earn the right to have another child. This is kind of upside-down on the age thing... it would take a long time to "earn" that second child, and allowing people to "borrow" would lead to a lot of defaulters. I also think that it shouldn't be extendable to as many children as you can "earn" - probably should be some kind of growing scale, like 1 UBI for the 2nd child, 2 more UBIs for the 3rd, 4 more UBIs for the 4th, and that's it... I don't see the point in letting the trust fund babies of the world have 20+ children each.
This also only works on a global scale if we can somehow get past nationalism, international competition, etc. There's no way that one competitive country is going to voluntarily institute negative population growth while their competitors are still increasing in numbers.
It's not an easy problem, but if it gets any further out of hand than it already is, it's going to be very painful for those living through the natural correction.
🌻🌻 [google.com]
(Score: 0) by Anonymous Coward on Sunday January 21 2018, @10:36PM
ironic?, that China continued to grow under their "one child" policy
Killing a parent once a baby was born wasn't part of the policy (drastic as it was).