There is no denying the Biden Administration is pro working families. Take the Infrastructure Act which focuses on onshoring, bringing and keeping jobs in the US. Take another look at the Federal Trade Commission taking a pro-worker leap by exposing non-compete clauses – clauses which prevent millions of working from taking a job at higher pay for a similar employer to the one they have now.
Corporations use other sources of power to underpay and disempower workers, so the Department of Justice and the FTC, are consulting worker representatives and the effect of creating ever bigger corporation mergers on workers. For too long the DOJ and FTC mainly considered the short term effect on prices. Regulators are seeking ways to rebalance the scales of power. University of Utah Professor Marshall Steinbaum recommends merger reviewers protect collective bargaining, since unions are one of the most effective ways to correct undue monopsony corporate power. That power matters because agencies once celebrated merger ‘efficiencies’ when all that meant is that big firms were able to slash worker pay and speed up work, which just amounted to labor exploitation.”
Evaluating the effect of mergers on labor markets is in the actual 1914 law. Section 7 of the Clayton Act states that “the labor of a human being is not a commodity or article of commerce.” Overtime the principle got ignored in merger review.
Beyond mergers that accumulate power are efforts by large corporations to dominate small businesses, misclassify workers as independent contractors, and outsource core operations to lower-wage non-union vendors. Unions help stop those practices. Also rulemaking and enforcement against unfair methods of competition under the FTC’s Section 5 authority also helps reduce labor exploitation.
Big Can Be Better if Workers Have Countervailing Power
But big is often better. Super firms in capital intensive industries are generally more innovative and conduct high levels of research and development. Without a union to serve as a countervailing power, super firms would shift profits to owners, raise manager salaries, buy back shares, and sit on idle cash. Workers could leave to seek better wages but as super firms grow they dominate the labor market. Workers are stuck and accept lower pay for their productivity.
A union in a concentrated sector takes wages and other basic terms of employment out of competition and no firm is incentivized drive workers to the lowest pay and worse working condition. Paying workers well becomes part of the business model of all members of the sector.
And there isn’t just one path for workers to raise wages. Many industries like truck drivers and warehouse workers, clothing and textile workers, construction workers, mine workers, janitors and home health workers are employed by uncoordinated small business. A union helps employers get on the same page, improve their training and have a steady labor force to rely on. No one firm is driving towards the bottom.
There are many paths for unions to share and create economic rents and productivity outside of vertically integrated oligopolies and collective bargaining. As Sandeep Vaheesan notes, “But right now, we seem to have the worst of both: Very large firms that wield awesome power and dominate their small firm satellites.”
Industrial Policy Doesn’t Work Without Industrial Relations
My coauthor Richard McGahey and I argue that Harvard Economist John Kenneth Galbraith’s vision of a postwar U.S. economy embedded “countervailing power” institutions, unions and collective bargaining in post war industrial policy that made America the leading economy of the Post WW11 economy. Working households had decent incomes to buy houses etc. and the big firms were successful. Industrial Policy embedded industrial relations. Industrial relations is the conscious effort to make sure unions can bargain with big and powerful employers to share the wealth and stabilize production.
Historian Nelson Lichtenstein is a cheerleader for big firms. A giant vertically-integrated oligopoly takes much more responsibility for the supply chain’s health and safety problems and minimizes some other forms of worker exploitation and abuse.
Brian Callaci and Sandeep Vaheesan, the legal and economist team at OpenMarrkets describe how Biden’s antitrust and labor agencies can rein in the abusive independent contractor and franchise rules to protect workers who are misclassified. And there are signs the Biden Administration is. The FTC just made that move by cracking down on franchisors exerting undue control over franchisees and workers.
David Madland, Center for American Progress, points to European Union’s breakthrough forming newish structures for unions — sectoral bargaining. Unions wouldn’t bargain firm by firm but would set standards for the whole sector. For example in the U.S. that would mean Mt Sinai Nurses bargain for pay and working conditions, which sets standards for all nurses in New York metro. An efficient and fair system for everyone.
Workers at the Table Can Help Rebalance the Economy
Communications Workers of America President Chris Shelton in the Hill argues that “labor considerations have for too long been absent from antitrust decisions even though mergers hurt workers. The Microsoft
MSFT
Today regulators and policymakers can address power imbalances in markets and grant workers their rightful place at the antitrust table.
My colleague, Nell Geiser, economist for the Communications Worker of America, and I cowrote a longer version of this essay.