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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: 3, Interesting) by bzipitidoo on Friday January 19 2018, @07:56PM
I'm guessing another cause, the ease of copying, is a major contributer to this employment situation. Such as, WalMart saved a lot on architecture expenses by making many of their bricks and mortar buildings the same.
Most corporate programming really is re-engineering the wheel. New algorithms are relatively rare. Instead, much work is hastily patching the major flaws in the horrendously rushed hack job the previous group was forced to bang out, removing hardcoded assumptions to increase flexibility and robustness or adapting the hardcoded data to changing circumstances, or porting the whole mess to the next version of whatever system it runs on, or to a whole new system. Even when designing a new program, such as a new video game, a lot of the work is very tedious. When it's not tedious, there are umpteen tedious ways to do something, and often we have to resort to those because the programming language and libraries are simply too limited. Despite decades of effort, code is way less portable than it could be.
But code is still portable enough that a lot remains useful for decades. Employers want to have it both ways. Pay programmers, artists, and scientists under a "work for hire" one shot arrangement, but collect revenue on a per copy basis under copyright. We'll never have a resolution of this issue until we come to grips with real and artificial scarcity. Rather than bitch and complain about the lack of jobs, I prefer the music of the greedsters howling about piracy and digital "theft" that they can do nothing about. In an ideal world, they should have no grounds to complain about copying.