This article won the 2022 Best News Story – National/International – 3rd Place, from the Labor Media Awards by the International Labor Communications Association.
WASHINGTON—Why can’t workers get ahead? Economically, that is.
Median wages for the broad U.S. middle class have been virtually stagnant for at least 40 years, adjusted for inflation, even as productivity has galloped ahead. The median for the bottom 20% has actually dropped.
Meanwhile, the rich, especially the top tenth, have reaped the rewards. That slice of the country earned 31.8% of all U.S. income in the most recent year available, according to the World Bank. The bottom tenth garnered 1.7%.
In share of national wealth, the top 1% now slightly tops the broad middle 60%. Income inequality now rivals that of the Roaring 20s, the Gilded Age, or both.
Economists have struggled to answer why for years. In a two-day symposium co-hosted by the Biden administration’s Justice Department’s Antitrust Division and the Federal Trade Commission, they came up with a combination of answers.
The biggest one: Monopoly
Declining private sector union density is one reason, panelists at the two-day session, December 6-7, said. A low minimum wage is another. Globalization, which exports well-paying factory jobs overseas, is a third. Technology, substituting robots for people, is in the mix—though one panelist noted, “You can’t substitute a robot for a nurse” at a Michigan hospital.
But the biggest problem, they said, is the huge power imbalance between the corporate class, and especially firm owners, who are fixated on profits, and workers.
In other words, monopoly power. Or to be precise, its flip side, “monopsony,” which indicates power over workers through what the Oxford English Dictionary defines as “a market situation in which there is only one buyer.”
Except, as the panelists, including Heidi Shierholz of the Economic Policy Institute and labor economist Heather Boushey pointed out, a firm can control as little as 20% of the jobs in an individual market to exercise such power. And that’s not all.
That’s because there are other constraints on workers’ ability to better themselves.
For example, Shierholz said, a worker may want to take another, better-paying job, but she literally can’t get to it. She can’t afford a car and there are no buses or subways. Or she’d have to move to another city, and the move is expensive. She’s stuck with her employer—who takes advantage of that. Take it or nothing, he says of her pay and benefits, or lack of them.
Bosses force workers to sign non-compete agreements, along with agreements not to disclose their wages to each other. Workers lost leverage, one panelist noted, when the GOP-named U.S. Supreme Court majority ruled several years ago that mandatory arbitration clauses can override even union contracts.
Unsaid, but implied: The fact that arbitrators side with bosses more than 90% of the time in boss-worker disputes over pay and other workplace issues.
And the growth of franchising, where the local franchise holder—say a Burger King or Motel 6 local owner—becomes a virtual employee of the corporation, except in name. Headquarters controls everything and is responsible for nothing, including workers’ wages and working conditions. That’s left to the locals.
Then there is bosses’ misclassification of workers as “independent contractors,” which takes away their power to join together to protect themselves. And the “gig economy,” where Uber, Lyft and DoorDash, and the like declare that because workers can set their own schedules—though the gig and its apps control everything else—they’re “independent,” too.
The result? “In an economy without adequate competition, prices and profits rise and workers’ wages decline,” said Boushey, now a member of President Biden’s Council of Economic Advisers.
As might be expected, the panelists from the Justice Department and the FTC said a new comprehensive all-of-government examination and implementation of antitrust laws—with a new definition of what a “trust” is—could help workers. They warned, however, that “there is no magic bullet” to reverse 40 years of wage stagnation.
Shierholz declared that it is time for economists to turn standard economic theory on its head. They now use economic theories to predict what will happen in the real world, such as that raising the minimum wage will cost jobs by making workers more “expensive” to firms.
Instead, she said, look at the real world and its impacts, and fit the theories to that.
“There are a variety of ways to make work more competitive,” for workers, Boushey argued. One, she suggested to Justice Department colleagues, is to factor the impact on workers into reviews of potential mergers.
That’s what DOJ did in recently vetoing Random House’s planned purchase of Simon & Shuster. It would have merged the nation’s two largest book publishers—and cost jobs at both. “That’s a signal the government will be considering a merger’s effect on workers, not just consumers,” she noted.
Another is to enforce anti-discrimination laws against firms prejudiced against working women and workers of color. Doing so would not only benefit individual workers, but the economy as a whole, by unleashing more earning power of workers who previously suffered.
And if the worker can’t get to the better job, take the better job to her, by investing in broadband nationwide so she can work from home, and better mass transit so she can take a bus to a better job.
“Provide reliable child care, too,” so she has the freedom to work, Boushey noted. Those investments “are in the president’s Build Back Better Act,” pending in Congress.
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