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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: 0) by Anonymous Coward on Saturday January 20 2018, @09:56AM

    by Anonymous Coward on Saturday January 20 2018, @09:56AM (#625110)

    Lower taxes for American businesses means higher wages for American workers

    That's been the Repug mantra for decades.
    The fact is that Trickle Down doesn't.

    Radio/TV presenter Thom Hartmann has been pounding on this exact topic lately.
    MP3 [kpfk.org] available until late February.
    14MB for the whole hour; The stuff I'm pointing to is in the first 6MB (16:15).
    His setup explanation starts at ~1:00.
    If you're impatient, the part that directly addresses tax cuts begins at ~9:20, after the break.

    Text version. [alternet.org]

    wage increases or bonuses

    I haven't seen anybody getting raises.
    There have been some 1-time bonuses.

    Walmart gave 1 of those.
    ...but if you haven't been there for 20 years, you get squat.

    Oh, and right after that, they closed dozens and dozens and dozens of Sam's Club stores.
    There was zero notice to the workers.
    Some showed up to work to find the place shuttered.
    Federal law says they have to give 60 days notice.
    Walmart is run by criminals.

    -- OriginalOwner_ [soylentnews.org]