Tuesday, January 23, 2018

[NJFAC] What explains wage stagnation?

Why Is It So Hard for Americans to Get a Decent Raise?

A new answer could change how we think about unions, monopolies, and the minimum wage. By Jordan Weissmann Jan 16, 2018

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.

The paper—written by José Azar of IESE Business School at the University of Navarra, Ioana Marinescu of the University of Pennsylvania, and Marshall Steinbaum of the Roosevelt Institute—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.....

June Zaccone
National Jobs for All Coalition

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