Wage suppression by monopsonistic big company practices

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anonymous_coward
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Wage suppression by monopsonistic big company practices

https://www.vox.com/the-big-idea/2018/4/6/17204808/wages-employers-worke...

Interesting article about how the trend of companies to be larger and more powerful has led to suppressed wages via non-compete clauses, anti-poaching agreements, and other practices.

I haven't read the source material yet, but the premise is interesting (obviously the devil's in the details).

Tom C
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Interesting idea, although

Interesting idea, although anything in Vox is almost always fake news leftie spin.

What killed the labor market was the unions, and their sell-out to the Democrat party - which killed the working class in this country with the death of a thousand cuts (and one big cut - NAFTA.)

Right now what's killing the labor market is the quality of American labor. There are good workers, but, my God, there are bad workers like I don't think we've ever seen before. Getting some of these people just to show up for work takes a miracle.

Ugenetoo
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Lack of a welfare hammock and

Lack of a welfare hammock and a little starvation would improve that type of attitude.

Economike
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I'm unimpressed.

I'm unimpressed.

To quote David Henderson, "Monopsony requires that the employer have no or few competitors trying to hire the same kind of labor."

Naidu, Posner, and Weyl rehearse many obvious points about labor markets. Yes, having to move to change jobs is friction. Yes, having to learn new skills is friction. But these transaction costs also affect employers looking for employees. The question is not "What conditions Increase costs of mobility for workers?" The proper question is "What uniquely increases costs of mobility for workers without also applying to employers?" In sum, the authors merely assume the prevalence of monopsony power and proceed from there.

I suspect, perhaps unfairly, that Mssrs. Naidu, Posner, and Weyl are biased by leftist ideology in accounting for labor market dynamics. For example,

While employers have taken advantage of labor market power throughout modern economic history, a worldwide social movement at the end of the 19th century moderated the worst excesses. Workers organized labor unions, which enabled them to oppose employers’ market power with the threat to shut down plants. A powerful legal regime was put in place that supported unions and protected workers with health, safety, minimum wage, and maximum-hour regulations.

Such laws, along with union rules, helped standardize work requirements, which made jobs more interchangeable and thereby allowed workers to more easily quit a workplace if the employer abused its power. These reforms helped spur broadly shared wage growth during the 30 years following World War II.

A moment's reflection on this passage will reveal it as pure baloney. Labor unions, and the legal "protections" that support them (whether wise policy or not), are labor market frictions. The notion that they make jobs "more interchangeable" is risible.

[Edited for clarity.]

Toolsmith
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Labor unions made cross

Labor unions made cross-training impossible, severing the workforce into micro-specialties that did not mix at all. Interchangeable? Nonsense.

anonymous_coward
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@Toolsmith: "Labor unions

@Toolsmith: "Labor unions made cross-training impossible, severing the workforce into micro-specialties that did not mix at all. Interchangeable? Nonsense."

Uh I think the assembly line & division of labor did that, not labor unions. Even in areas that have never had unions (software, for example) there is very high specialization.

anonymous_coward
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@Economike: Sure, I suspect

@Economike: Sure, I suspect there is some bias there as well, but that doesn't mean it's not worth exploring.

FWIW I think labor unions make sense when there is literally nowhere else to work (e.g. professional sports, mega corps like Samsung, or AT&T back in the day where they own entire towns). However I've never understood the teachers' union, or the various construction jobs.

anonymous_coward
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BTW, Trump has stated that he

BTW, Trump has stated that he believes the federal minimum wage should be raised to $10/hour. Damn liberals!

Edit: damn wrong thread

mainemom
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To understand economic

To understand economic concepts, we typically assume perfect competition and rationality. We're learning that rationality isn't always a good assumption when looking at real people, and of course there are imperfections that affect competition as well, be they localized or the result of government interference or other considerations.

How convenient for the authors to point to other forms of compensation as tools of monopsony to keep wages down. I surmise that the aim of the piece is to promote regulations dictating a "level playing field" on paid leave, health insurance, and the like.

Here's an article by Megan McArdle discussing these ideas in a different context.

Jobless Benefits If You Quit? There's Some Logic

During the debate over Obamacare, there was one argument that came up again and again when conservatives questioned the economic effects of a massive new government program (and the massive taxes needed to pay for it). Obamacare, proponents said, would actually be good for the economy, because it would jump-start entrepreneurship, allowing folks who were trapped in their jobs by the need for health insurance to finally go out on their own and make the American Dream happen.
I was skeptical at the time, and have become only more so. Obamacare has now been in operation for four full years. During that time, has self-employment exploded? It has not. In fact, despite the emerging lure of the “gig economy,” it is basically flat since 2012.

Now I have a question.
If it's true that employers are exercising monopsony power, why have we seen younger age cohorts changing jobs at a much higher rate than their elders do (or did)?

You Should Plan On Switching Jobs Every Three Years For The Rest Of Your Life

The Hidden Reasons Why Gen-Xers’ Career Prospects Are Rising

Generation X spends over 20 per cent longer in each job than Gen Y does

And there's this:
The truth is that it may take several jobs to get to a good place in a career and know what you want. Millennials have demonstrated they have staying power when they’re in the right place, so when millennials do switch jobs, it’s probably not flakiness. It could be the sign of an important strategic switch.

Surprise: Millennials stay in jobs longer than Gen X ever did

pmconusa
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Competition only exists in a

Competition only exists in a free market and the majority of the market is no longer free because of the fascist regulatory policies of the government. The only free market that exists today is that of information dispersal and that is currently under attack because the government hasn't found a way to regulate it that does not run afoul of the Constitution's prohibition of laws regulating the freedom of speech. It also doesn't take much to get into this market because entry into it is essentially free, the only capital expense are the servers necessary to hold and disperse the data. The problem arises in that the owners of this market are behaving like censors to dispense their own dogma.

As for unions, they exist solely for the purpose of extorting unearned income from their employers to the point they have put nearly all manufacturing enterprises out of business, save those protected by the government. In the service industry, any service that doesn't require the direct handling of a product, like the fast food industry, is subject to any foreigner who can speak English.

There are two kinds of employees, producers and facilitators. The producers possess the skill necessary to deliver the product or service and the facilitators create the environment in which they operate, i.e. salesmen, buyers of raw materials and the accountants who take care of the books and the lawyers who figure out ways to cook them. Job hopping and job protection for the producers is assured so long as there is a need for them and is almost non-existent any more for the facilitators because their ability to function effectively is the result of the networks they have established amongst themselves which is not transferrable. This used to not be the case with CEO's who when stolen by another company could only be effective if they brought their network with them. Those who thought they could resurrect their company by hiring for example, a GE trained top executive who then brought his network with him, soon learned that it doesn't work.

As to why today's American youth take a back seat to illegal immigrants it is because they have been indoctrinated to believe they are owed employment, needn't show up on time and can spend most of their day surfing the web on the company's computer system. To top it off they have been taught that manual labor is demeaning. I still remember advice I was given when entering the job market over 50 years ago. I was told if I asked the recruiter about the company's retirement and benefit programs during the interview my chances of getting an offer were next to nil. If you asked about challenges and opportunities you stood a better chance.

anonymous_coward
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@mainemom: these are all well

@mainemom: these are all well and good but they are also anecdotal (looking a specific generation and looking at specific examples). To do a proper analysis you have to look at statistics (which is what I was hoping the original article did, but haven't had a chance to look at it yet.)

Economike
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.... these are all well and

.... these are all well and good but they are also anecdotal (looking a specific generation and looking at specific examples). To do a proper analysis you have to look at statistics ....

Hmmmm. Wouldn't any statistical analysis necessarily require data based on specific examples?

anonymous_coward
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No, it would require broadly

No, it would require broadly collected data, not specific examples.

pmconusa
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Labor has the upper hand when

Labor has the upper hand when there is a shortage of workers. The first mass migration of workers came in the early part of the twentieth century when the industrial revolution began to take hold on Americas growing industry. Before WW I it was Henry Ford who used the wage to retain his employees not, as some people claim, to provide them the funds in order to buy the product they were making. After the war employers did not need to increase wages because there were now surpluses developing due to the increase in immigration and the indigenous growth of the existing population. Labor then got the upper hand when the Roosevelt Administration passed labor legislation that gave labor the right to collective bargaining. Though unconstitutional, the courts allowed it under the justification used previously in other unconstitutional issues that the end justifies the means. We all know where that led.

We now have a case where labor has been divided into two categories; the first being prepared to be trained in fundamental concepts of the job and the second, those totally unprepared. Because our schools no longer teach or even address the fundamentals of various forms of labor, such as wood working, machinery and electricity, the schools are turning out more of the latter. This is also true at the college level, with the exception of the scientific and medical disciplines.

Jobs at the low end of the totem go unfilled in many cases because those who need them are few' either based on geography or the fact they can live off their parents or a government dole if they were previously employed. The governments attempts to rectify the situation by creating work by subsidizing it is doomed to failure because sooner or later the people will balk at either high taxes or debt being used to fund these efforts. The Germans went through this phase after WW I and what were the consequences; Adolph Hitler and the third Reich. Guess who bailed out Hitler when he refused to pay the reparations agreed to with Britain, France, etal.? U. S. banks actually funded the German recovery.

Unfortunately, we will have no one to fund ours, because there won't be one.

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