Why isn't the "Economic Recovery" increasing workers' pay?

[lpetrich]

Corporate America Is Suppressing Wages for Many Workers - The New York Times

Despite the economic recovery and increasing employment over the last eight years, workers' wages have not changed much. Globalization? Automation? Some economists propose another cause.

In fact, a growing body of evidence pins much of the blame on a specific culprit, one for which proven legal weapons already exist. But they are not being used.

The culprit is “monopsony power.” This term is used by economists to refer to the ability of an employer to suppress wages below the efficient or perfectly competitive level of compensation. In the more familiar case of monopoly, a large seller — like a cable company — is able to demand high prices for poor service because consumers have no other choice. It turns out that many corporations possess bargaining power over their workers, not just over their consumers. Their workers accept low wages and substandard working conditions because few alternative job opportunities exist for them or because switching jobs is costly. In other words, in the labor market, effectively a small number of employers are competing for their labor.

This has had several causes, like corporate consolidation over the last few decades, and also such things as non-compete clauses in employment contracts and no-poaching agreements between businesses.

For a long time, economists believed that labor-market monopsony rarely existed, at least outside old-fashioned company towns where a single factory employs most of the residents. But in recent decades, several compelling studies have revealed that monopsony is omnipresent. Professionals like doctors and nurses, workers in factories and meat processing plants, and sandwich makers and other low-skill workers earn far less — thousands of dollars less — than they would if employers did not dominate labor markets.

 

[Underseer]

Because the economic policies of almost all Republicans and the corporatist/establishment Democrats are pretty much designed to make sure life gets harder and harder for those worthless commoners so that the deserving elites can become more and more wealthy.

That's the whole fucking point. That's why they attack unions and suppress the minimum wage and give tax breaks to companies for shipping jobs out of the country and refuse to enforce antitrust laws and cut taxes and deregulate industries and reduce restrictions on campaign donations and all the rest of that crap. It's specifically to fuck with everyone so that the economic elites can become even more wealthy.

This is by design.

And they have conservolibertarians so hopped up on propaganda that they will work very hard to make all of this worse.

 

[Loren Pechtel]

Jimmy John's having a non-compete clause is supposed to be evidence of a restriction of labor??

It's not like there is a profession of sub-maker. At best it's fast-food worker and most fast food isn't subs. How is this an appreciable restriction?

Then I find this (I'm looking at the referenced paper, not the opinion piece you linked):

Further evidence on monopsony is provided by (grim) evidence on worker deaths. Adam Isen estimates the effect of worker deaths on payroll and sales, and finds that sales fall more than payroll, suggesting that workers are paid less than their marginal product.

That's supposed to be evidence of a problem? Duh--if a company isn't making more off an employee than the cost to hire them they would be stupid to have them on the staff! (Not to mention that "payroll" doesn't even cover all the costs of an employee.)

Sorry, I can't take it seriously at this point.

 

[Politesse]

Because "the economy is getting better" is code for the wealthy getting wealthier. This gives them more tyrannical power over their workers, not less.

 

[laughing dog]

Jimmy John's having a non-compete clause is supposed to be evidence of a restriction of labor??...

It is a restriction of labor. To the extent the former employee obeys the non-compete clause, that person’s options are restricted. It is delusional to claim otherwise. You may feel that clause is unlikely to be enforced, but your feelings are irrelevant to the issue. And your feelings may be inaccurate.

Further evidence on monopsony is provided by (grim) evidence on worker deaths. Adam Isen estimates the effect of worker deaths on payroll and sales, and finds that sales fall more than payroll, suggesting that workers are paid less than their marginal product.

That's supposed to be evidence of a problem? Duh--if a company isn't making more off an employee than the cost to hire them they would be stupid to have them on the staff! (Not to mention that "payroll" doesn't even cover all the costs of an employee.)

When sales falls by more than payroll, then the value of the output (assuming sales is in dollar terms, not physical units of output) lost exceeds the cost of paying that employee.

Workers being paid less than the value of the marginal output is a indicator (not proof) of monopsony power – as anyone with a background in mainstream economic theory understands.

One of authors of the cited OP article (Alan Krueger) is a well-known and highly regarded labor economist. I strongly suspect he is more knowledgeble and more familiar with the data than most people. At least he shows that he understands economic theory and basic reasoning.

 

[untermensche]

The only force that has consistently shown to increase wages as the wealth of a company increases are union forces.

Collective labor that is protected by the law.

When the government stops protecting unions the wages for most stagnate.

The greater the government protects the rights of collective labor, the lifeblood and physically productive element of a company, the greater the middle class.

You add in things like free college education and universal health insurance and the middle class thrives.

The rich do not do as well but they exist.

 

[coloradoatheist]

The only force that has consistently shown to increase wages as the wealth of a company increases are union forces.

Collective labor that is protected by the law.

When the government stops protecting unions the wages for most stagnate.

The greater the government protects the rights of collective labor, the lifeblood and physically productive element of a company, the greater the middle class.

You add in things like free college education and universal health insurance and the middle class thrives.

The rich do not do as well but they exist.

Yes, there is a wage premium in that scenerio but it has drawbacks. It leads to slow job growth, higher unemployment, and for workers it ties workers down more to their career path. Number 3 is most important as a drawback that I see.

The irony is that we need to put in things in so corporations act more like corporations.

There wasn't enough information in the paper to make decisions. If all the can point to is Jimmy Johns non-compete then it's a stretch.

 

[T.G.G. Moogly]

Because "the economy is getting better" is code for the wealthy getting wealthier. This gives them more tyrannical power over their workers, not less.

Yes, but the people are the same.

In other words, if you took those folks who's wealth is low and traded places with those folks who's wealth is high, nothing would change because they both have the same mindset at this point. And it doesn't matter if those folks are making government policy or running billion dollar companies. They're only in it for themselves.

We've all witnessed people turn on the very policies which improved their lives and the lives of their families. It seems to me that this has been happening since Reagan. When a person with a government pension and benefits can bring themselves to vote billionaires into office for ideological reasons I think that proves my point. If they didn't have that kind of security they'd vote differently, as people did for FDR.

I'm not an economist but the problem has to be somehow related to the fact that we can steal ourselves into any level of debt.

 

[Canard DuJour]

It turns out that many corporations possess bargaining power over their workers, not just over their consumers. Their workers accept low wages and substandard working conditions because few alternative job opportunities exist for them or because switching jobs is costly.

For a long time, economists believed that labor-market monopsony rarely existed, at least outside old-fashioned company towns where a single factory employs most of the residents. But in recent decades, several compelling studies have revealed that monopsony is omnipresent. Professionals like doctors and nurses, workers in factories and meat processing plants, and sandwich makers and other low-skill workers earn far less — thousands of dollars less — than they would if employers did not dominate labor markets.

The studies show that common features of the labor market give enormous bargaining advantages to employers.

Well I'm shocked. Shocked I tell you!

Next they'll be telling us that some force prevents us all floating into the air.

 

[Politesse]

Because "the economy is getting better" is code for the wealthy getting wealthier. This gives them more tyrannical power over their workers, not less.

Yes, but the people are the same.

In other words, if you took those folks who's wealth is low and traded places with those folks who's wealth is high, nothing would change because they both have the same mindset at this point. And it doesn't matter if those folks are making government policy or running billion dollar companies. They're only in it for themselves.

We've all witnessed people turn on the very policies which improved their lives and the lives of their families. It seems to me that this has been happening since Reagan. When a person with a government pension and benefits can bring themselves to vote billionaires into office for ideological reasons I think that proves my point. If they didn't have that kind of security they'd vote differently, as people did for FDR.

I'm not an economist but the problem has to be somehow related to the fact that we can steal ourselves into any level of debt.

Very true. But it does help us understand why, in any situation of considerable wealth inequality, the benefits of an "improved economy" are not going to be equally distributed, and indeed may well make things less fair to workers from their own perspective.

 

[dismal]

For a long time, economists believed that labor-market monopsony rarely existed

A long time which includes "today".

 

[SimpleDon]

Yes, the corporations hold monopsony power over employees. The corporation is shaped by market forces to innovate and to produce with a ruthless efficiency that has to be moderated and restrained by the government and by the professionalism and the ethics of the management.

It is the government's job to define the rules and regulations that corporations operate under to make sure that the corporations, in general, operate in a way that doesn't harm, their customers, the general public or their employees, that maintains the vital competitiveness in the markets and that channels the very narrow goal of making profits into meeting what society needs from the corporations. It is the job of the management to apply these restraints to their company and to keep their company profitable and productive.

This government oversight role has been subverted in the US by people who believe that the government's role is on the whole destructive and that the corporations and society would be better served if the government's role was restricted to settling disputes ex-post facto, after the fact, rather than imposing regulations that define acceptable behavior, ex-anti. That translates into minimizing the legislative and executive functions of the government and vastly expanding the judicial, while restricting the judicial to equity law only, a.k.a, common law. That is, minimize statutory law writing and enforcement and depend on judicial law writing and enforcement.

This means that the governance of corporations in the market is completely at odds with the governance that everyone seems to believe is required for individuals' behavior in society, that is statutory laws defining the limits of acceptable behavior enforced by the executive as well as the judicial function.

In my mind, this view is based on three mistaken assumptions. That the government is evil and that they control the market to enrich themselves. That the markets through the mechanism of prices being set by supply and demand will self-regulate to produce what society needs with the greatest social degree of social justice possible.

And that this can be achieved when the corporations are pressured to achieve the largest possible profits and to pay them to the stockholders as their only legitimate goal. In short, that society is subservient to the economy, not that the economy is a tool of the society to achieve its own needs and wants.

It is this third mistaken assumption that dictates that corporations should suppress wages to achieve the largest profit possible. This is not the only possible goal to set for a corporation. Worldwide most nations require the management to temper the profit motive with their responsibility to the well being of their employees and of the society as a whole. That management must balance these responsibilities in their efforts to grow and to preserve the company.

It is arguable that the future of any corporation is tied much more closely to the quality and well-being of their employees than it is to the stockholders and the value of their stock. This concern for the employees above the incomes of the stockholders is the more natural situation. If for no other reason than the management of the corporation are employees themselves.

This ethos of the only goal of the corporation is to make profits for the stockholders is slowly tainting the professionalism of different occupations in the corporation. For example, the accountants who lied about the current value of the mortgage-based securities held by the banks before their implosion started the Great Financial Crisis and eventually The Great Recession. Or the appraisers who overstated the value of the homes to keep from losing the business of the banks, once again, a vital part of the Great Financial Crisis.

 

[untermensche]

The only force that has consistently shown to increase wages as the wealth of a company increases are union forces.

Collective labor that is protected by the law.

When the government stops protecting unions the wages for most stagnate.

The greater the government protects the rights of collective labor, the lifeblood and physically productive element of a company, the greater the middle class.

You add in things like free college education and universal health insurance and the middle class thrives.

The rich do not do as well but they exist.

Yes, there is a wage premium in that scenerio but it has drawbacks. It leads to slow job growth, higher unemployment, and for workers it ties workers down more to their career path. Number 3 is most important as a drawback that I see.

The irony is that we need to put in things in so corporations act more like corporations.

There wasn't enough information in the paper to make decisions. If all the can point to is Jimmy Johns non-compete then it's a stretch.

Rubbish.

Putting more money into the hands of workers and less into the hands of the masters that have too much already is how you create a vibrant economy.

Where do you get these stories? They are lies put out by greedy owners.

 

[dismal]

Yes, the corporations hold monopsony power over employees.

Should those of us who know what the word "monopsony" means assume you meant to say "the corporation" and forge ahead, or should we assume it's just a bunch of babble from someone who doesn't understand what a monopsony is?

 

[Loren Pechtel]

It is a restriction of labor. To the extent the former employee obeys the non-compete clause, that person’s options are restricted. It is delusional to claim otherwise. You may feel that clause is unlikely to be enforced, but your feelings are irrelevant to the issue. And your feelings may be inaccurate.

That's supposed to be evidence of a problem? Duh--if a company isn't making more off an employee than the cost to hire them they would be stupid to have them on the staff! (Not to mention that "payroll" doesn't even cover all the costs of an employee.)

When sales falls by more than payroll, then the value of the output (assuming sales is in dollar terms, not physical units of output) lost exceeds the cost of paying that employee.

Workers being paid less than the value of the marginal output is a indicator (not proof) of monopsony power – as anyone with a background in mainstream economic theory understands.

One of authors of the cited OP article (Alan Krueger) is a well-known and highly regarded labor economist. I strongly suspect he is more knowledgeble and more familiar with the data than most people. At least he shows that he understands economic theory and basic reasoning.

What are you smoking???

1) The value a worker produces is sales - costs, not simply sales.

2) Payroll doesn't cover all the costs of a worker.

3) If the company isn't profiting by having a worker why would they have the worker?

You've set up such a nutty definition that it would be all but impossible not to find it.

- - - Updated - - -

The only force that has consistently shown to increase wages as the wealth of a company increases are union forces.

Collective labor that is protected by the law.

When the government stops protecting unions the wages for most stagnate.

The greater the government protects the rights of collective labor, the lifeblood and physically productive element of a company, the greater the middle class.

You add in things like free college education and universal health insurance and the middle class thrives.

The rich do not do as well but they exist.

If unions are the only way to increase wages why are almost all the best paying jobs non-union?

 

[laughing dog]

2) Payroll doesn't cover all the costs of a worker.

What costs of a worker are excluded from  Payroll ?

3) If the company isn't profiting by having a worker why would they have the worker?

Huh?

You've set up such a nutty definition that it would be all but impossible not to find it.

WTF are you babbling about now?

[

 

[Politesse]

What costs of a worker are excluded from  Payroll ?

Lawsuits.

 

[Politesse]

3) If the company isn't profiting by having a worker why would they have the worker?

Well, they used to sell products...

 

[Loren Pechtel]

What costs of a worker are excluded from  Payroll ?

FICA taxes.
Workers comp.
Insurance.
Phones.
Office space and equipment.

You've set up such a nutty definition that it would be all but impossible not to find it.

WTF are you babbling about now?

I gave you a list of the problems. You made a vague attempt to address one of them and ignored the rest--so now you call it babbling to avoid addressing the issue.

 

[laughing dog]

FICA taxes.
Workers comp.
Insurance.

Payroll means compensation which includes those things.

Phones.
Office space and equipment.

Those are not costs of employees. Duh.

I gave you a list of the problems.

No, you gave me a list driven by ignorance and nonsense. You don't even understand the basic terms (like payroll)

You made a vague attempt to address one of them and ignored the rest--so now you call it babbling to avoid addressing the issue.

Naw, that is your MO.

This is simple. The evidence in question is the study of sales lost from the non-replacement of a worker who dies. Unless you are arguing that the employers are killing these workers, these workers would presumably be helping the firm earn a profit (otherwise, they would have been laid off or fired) which means sales exceeded all costs including the opportunity costs (which included a required rate of return). Hence your entire response is based on either pure ignorance or irrelevancies.