There is No Free Labor Market

Financial Justice Ideas and Issues Workers

            New Orleans      Finally, it appears that economists are catching up with the on-the-ground reality when it comes to workers and the factors that push down on their wages.  Arguments that there is a free labor market, universally mobile and propelled by little more than self-interest, have always been specious.  Rationalizations that low wages were based on cost-of-living differences, rather than employer action have been equally farcical.  A watershed reckoning of the impacts of such presumptive collusion on wage-setting in geographical markets finally seems to have punched a hole in the myths that there is a free labor market.  A new report by the Treasury Department is finally putting their seal of approval on this sea change.

Eduardo Porter, the erstwhile reporter still occasionally writing in the Times, summarized the report saying:

Drawing from recent economic research, the report concludes that lack of competition in the job market costs workers, on average, 15 to 25 percent of what they might otherwise make.  And it emphasizes that the administration will deploy the tools at its disposal to restore competition in the market for work.

            That’s a lot of money!

Maybe it’s not just talk either.  Only days ago, there was another report that big poultry companies like Pilgrim’s and likely others like Tyson and Sanderson Farms, were being investigated by the Justice Department on whether they were sharing labor market information in order to keep wages in their plants lower.  Pardon the pun, but if that’s happening, it isn’t chicken feed.   Earlier this year, the Justice department went after four home health outfits in Maine for “conspiring to suppress the wages and restrict the job mobility of essential workers during the pandemic.”  There are also non-compete clauses even in companies like fast-food, and not just big Silicon Valley tech, to hold workers in place and keep wages down.

This may be a new recognition, but it is not a new phenomenon.  Wages in much of the South have been suppressed for decades, usually overtly, as business owners, chambers of commerce groups, and others argued that they didn’t want out-of-town companies in their labor markets raising wages and unsettling the labor market around gender, race, and ethnicity.  They didn’t want competition and they discouraged it, even while anti-trust was myopically focused sometimes on individual companies competing for consumers.

Consumers are critical.  They should not be harmed by the lack of choices and competition dividing business and product winners and losers by being forced to pay excess prices for goods and services, or what the economists call “rents.”  But, finally, this administration understands that not only consumers, but also workers, are being hurt by collusion and consolidations.

Now, facing reality in the workplace and the marketplace, the question becomes whether they will finally do something about it.