Policymakers have held off on raising the minimum wage and made it harder for workers to hold bargaining power, and the Fed has opted to push for low inflation instead of high employment. (Photo: Shutterstock)
The bottom 90 percent have suffered a “collapse in pay” that can be laid at the door of politicians and their decisions, reports the Washington Post.
The Post is reporting on an analysis of wage stagnation by the Economic Policy Institute, which says that specific policy changes, including the weakening of unions, the stagnation of the minimum wage and monetary policies pushing low inflation instead of full employment, all contributed to taking power away from workers and pushing it toward their employers.
As a result, that power shift has cost the bottom 90 percent of wage earners $1.53 trillion in income just in 2015—amounting to $10,800 for every American household.
Related: Why is wage growth so sluggish?
According to researchers Josh Bivens and Heidi Shierholz, somewhat recent research into monopsony—defined by them as “the leverage enjoyed by employers to set their workers' pay”—allowed economists to explain some of the wage stagnation that's taken place over the last four decades.
In monopsony, there are usually relatively few employers, which gives them an outsized advantage in setting wages since workers have few alternative sources of employment. But if that were the sole source of wage stagnation, say the researchers, wages should be stagnating at all levels of pay. However, most of the wage stagnation has instead been concentrated at the bottom of the scale, with those at the high end seeing salaries rocket upward.
So, say the researchers, rather than caused by rising employer power over wages, wage stagnation is instead caused by “deliberate efforts to undermine worker power.” Policymakers have held off on raising the minimum wage and made it harder for workers to hold bargaining power (incidentally harming unions), and the Fed has opted to push for low inflation instead of high employment.
Some of those policies were supposed to boost productivity, but have actually had the opposite effect. And Bivens and Shierholz say that what policymakers should do to boost wages is to strengthen unions, raise minimum wages and shoot for full employment. “In short, the policy movement to dis-empower workers not only led to less equal growth, but was also associated with significantly slower growth,” they're quoted saying in the report.
Of course, not everyone agrees 100 percent; Ioana Marinescu, an economist with the University of Pennsylvania who has written extensively on the causes of wage stagnation, is cited saying in the report that “she generally agrees with the paper's findings but thinks the EPI authors' emphasis on certain policy decisions is overstated.”
Marinescu is quoted saying, “There is no reason not to go after abuses of dominance in the labor market if we go after abuses of dominance in the product market.” If that were done, the effect of antitrust legislation could have the double effect of lowering consumer prices and boosting wages.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
