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The labor market is tight as a drum, with workers walking away from one job and right into another that pays better, the story goes.
The reality is not so simple, says a new report from the U.S. Treasury department.
Too often, employers face little competition for workers, allowing companies to dictate pay rates and conditions of employment, the report found.
The report recognizes “that the idea of a competitive labor market is a fiction,” assistant treasury secretary Ben Harris told The Wall Street Journal. “This is a sea change in economics.”
Because employers face little competition for employees, workers often are paid as much as 25 percent less than they would in a jobs market in which companies had to work to attract the best workers, the report said.
Employers facing little competition also can skimp on safety or rest periods, switch schedules on short notice, monitor workers’ personal social media, and otherwise make job conditions dismal, the report added.
Employers throttle competition for workers in several ways.
Some businesses require workers to sign “noncompete” agreements that bar employees from working for a competitor, or even in the same field, for a period of time after leaving their current job.
Companies sometimes demand workers sign “nondisclosure” agreements that forbid them to discuss wages or working conditions with anyone, including fellow employees.
If there was greater competition for talent, a worker might still sign such agreements but would be in a better position to negotiate a higher salary or greater benefits in return.
“There is a long list of insidious efforts to take power out of the hands of workers and seize it for employers’ gain,” Seth Harris, deputy director of the National Economic Council, said to the WSJ.
Also, structural changes in the economy have robbed workers of their power.
Outsourcing services such as janitorial work, food service, and security have transferred jobs from individual companies to agencies, which compete to offer the lowest price to clients, which means cutting wages to the bone.
The rise of the gig economy is the ultimate form of outsourcing. Freelancers—who must pay their own medical insurance premiums, save on their own for retirement, and cover 100 percent of their own Social Security taxes—compete against each other to provide clients the greatest amount of work for the lowest price.
If another freelancer is willing to work cheaper and offers the same level of quality, the lowest-earning freelancer gets the job.
Mergers and acquisitions among hospitals, food service businesses, and other businesses create financial “efficiencies” by consolidating work in a central place that previously was done in several. That means not only fewer jobs, but a smaller number of companies in the industry that might offer displaced workers new jobs.
From 1975 to 2021, mergers pared the number of U.S. hospitals from 7,156 to 6,093, the report noted, citing data that the shrinkage has cut wages for nurses, pharmacists, and other skilled workers.
Unions, traditionally the lever that gave workers bargaining power, “are virtually irrelevant across much of the labor market,” the WSJ said.
Only 6 percent of private-sector workers are union members, the report found.
Passing laws limiting noncompete and nondisclosure agreements might be possible, the report concluded, but strengthening workers’ ability to unionize or raising the federal minimum wage from its current $7.25 will continue to face hurdles in Congress.
TRENDPOST: While the study cites past conditions, our Top 2022 Trend of workers unionizing and reclaiming their power looks ahead: we see employees organizing, bargaining for better conditions, and winning more and more of those fights, as we have documented in stories such as “Unionization On-Trend: Amazon Workers Vote to Unionize” (8 Feb 2022).
For more evidence that this trend is taking root, see “‘Big Quit’ Continues as Employers Struggle to Fill Jobs” in this issue.