Monday, April 09, 2018

Monday Morning Links

Miscellaneous material to start your week.

- Suresh Naidu, Eric Posner and Glen Weyl highlight how the economy as a whole suffers when employers exercise too much control over wages and working conditions:
In a competitive labor market, employers must vie for workers; they try to lure workers from other firms by offering them more generous compensation. As employers bid for workers, wages and benefits rise. An employer gains by hiring a worker whenever the worker’s wage is less than the revenue the worker will generate for the employer; for this reason, the process of competition among employers for workers ought to result in workers receiving a substantial portion of the output they contribute to.

And as the economy grows over time — which has historically been the case in the United States — this dynamic should naturally lead to a steady increase in compensation for workers.

It turns out, however, that labor markets are often uncompetitive: Employers have the power to hold down wages by a host of methods and for numerous reasons. And new academic studies suggest the markets have been growing ever more uncompetitive over time.

It is sometimes mistakenly thought that wage suppression, even as it hurts workers, at least benefits consumers, who pay lower prices for goods and services (since the cost of production is lower for companies). In fact, that’s not the case: Employer market power, sometimes called “monopsony,” harms economic growth and raises prices. (Monopsony is the concept of monopoly, or dominance of a market for a given good, applied to the “buy side” — namely, the inputs that firms purchase, including labor and materials.)

Monopsony harms growth and raises prices because it works much like monopoly: by reducing production. To increase its profits, the monopolist raises prices and thus lowers production (because fewer consumers are willing to pay these inflated prices). 

Similarly, to raise its profits, a monopsonist lowers wages below the value of the workers to the employer. Because not all workers are willing to work at these depressed wages, monopsony leads some workers to quit. 

Firms bear the loss in workers (and resulting lowered sales) in exchange for the higher profits made off the workers who do not quit. The resulting group of workers looking for jobs are what Marx called the “reserve army of the unemployed.”

Employer labor market power thus reduces employment, raises prices, and depresses the economy. 

Those sound a lot like the harms that conservative economists have long attributed to excessive taxation. And that’s no coincidence. Wage suppression is just like a tax: a tax on the labor of workers.
- Chris Dillow examines the persistent pay gap between men and women, along with a few of the factors which perpetuate it. And Kate Farhall argues that family violence leave needs to be paid for many people to be able to escape abuse.

- Jeff Sprass writes that the growing movement of teachers' strikes may be the start of stronger "alt-labor" organizing in response to a political environment designed to suppress collective action. And Syed Hussan offers some activists' suggestions as to how organized labour should participate in Ontario's provincial election.

- Finally, Tim Harper points out that millennial voters will be playing a far larger role than ever before in that election (and others to come). And Neil MacDonald comments on the effectiveness of school shooting survivors in organizing to respond to right-wing suppression. 

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