Later On

A blog written for those whose interests more or less match mine.

Lawrence Summers: It’s time to balance the power between workers and employers

with 7 comments

A plea for unions from Larry Summers, but the GOP has so weakened labor law and labor agencies that I see little hope. And the presence of monopolies or monopoly-like behavior (Steve Jobs setting up agreements among tech companies to underpay employees by keeping salaries low (by preventing bidding wars that would determine true market value of a potential employee)), also keep workers down and non-unionized. Summers writes in the Washington Post:

The central issue in American politics is the economic security of the middle class and their sense of opportunity for their children. As long as a substantial majority of American adults believe that their children will not live as well as they did, our politics will remain bitter and divisive.

Surely related to middle-class anxiety is the slow growth of wages even in the ninth year of economic recovery. The Phillips curve — which postulates that tighter labor markets lead to an acceleration of wage growth — appears to have broken down. Unemployment is at historically low levels, but the Bureau of Labor Statistics reported Friday that average hourly earnings last month rose by all of 3 cents — little more than a 0.1 percent bump. For the past year, they rose by only 2.5 percent. In contrast, profits of the S&P 500 are rising at a 16 percent annual rate.

What is going on? Economists don’t have complete answers. In part, there are inevitable year-to-year fluctuations (profits have declined in several recent years). And in part, BLS data reflects wages earned in the United States, even though a bit less than half of profits are earned abroad and have become more valuable as the dollar has declined relative to other currencies. And finally, wages have not risen because a strengthening labor market has drawn more workers into the labor force.

But I suspect the most important factor is that employers have gained bargaining power over wages while workers have lost it. Technology has given some employers — depending on the type of work involved — more scope for replacing American workers with foreign workers (think outsourcing) or with automation (think boarding-pass kiosks at airports) or by drawing on the gig economy (think Uber drivers). So their leverage to hold down wages has increased.

On the other hand, other factors have decreased the leverage of workers. For a variety of reasons, including reduced availability of mortgage credit and the loss of equity in existing homes, it is harder than it used to be to move to opportunity. Diminished savings in the wake of the 2008 financial crisis means many families cannot afford even a brief interruption in work. Closely related is the observation that workers as consumers appear more likely than years ago to have to purchase from monopolies — such as a consolidated airline sector or local health-care providers — rather than from firms engaged in fierce price competition. That means their paychecks do not go as far.

On this Labor Day, we would do well to remember that unions have long played a crucial role in the American economy in evening out the bargaining power between employers and employees. They win higher wages, better working conditions and more protection from unjust employer treatment for their members. More broadly, they provide crucial support in the political process for programs such as Social Security and Medicare that benefit members and nonmembers alike. (Both were passionately opposed by major corporations at their inception.)

Today, only 6.4 percent of private-sector workers belong to a union — a decline of nearly two-thirds since the late 1970s. This is the one important contributor to the decline in the relative power of labor, especially those who work with their hands. Workers seeking gigs on their own are inevitably less secure than a group collectively representing their interests. The decline in unionism is also a contributor to the pervasive sense that our political system is too often for sale to the highest bidder.

What can be done? . . .

Continue reading.

Written by Leisureguy

3 September 2017 at 7:06 pm

7 Responses

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  1. “A plea for unions from Larry Summers, but the GOP has so weakened labor law and labor agencies that I see little hope. And the presence of monopolies or monopoly-like behavior (Steve Jobs setting up agreements among tech companies to underpay employees by keeping salaries low (by preventing bidding wars that would determine true market value of a potential employee))”

    They got their chops busted for that, and rightly so:

    Apple, Google, others settle antipoaching lawsuit for $415 million

    I have been at companies that had anti-poaching agreements in place, albeit informally and off the record. When things went south, we all just bailed and joined companies that were not part of the anti-poaching agreements. The one where I landed was one of the best jobs ever.

    The real problem is that high tech companies in many areas have very high labor costs due to the stratospheric cost of living in many tech-focused areas. That, in turn, is caused by unnecessary restrictions on the new housing and office space construction imposed by many cities and suburbs. That is done primarily through pointless height limits and byzantine permitting processes. It is very profitable for the 1 percent, but very bad for everyone else. I am sure that the Republican bankers and Democratic members of a variety of unions would all be happy to work together to finance and build new housing. The powers that be just need to let them do it. Otherwise, companies will continue to turn to anti-poaching practices and often grossly underpaid H1B employees to keep costs in check. Unionizing would simply offshore those jobs or make the companies go out of business.

    “also keep workers down and non-unionized.”

    That ignores the fact that most tech workers want absolutely nothing to do with unions. Why should they unionize if they are already being treated well? Not all companies are badly managed or mistreat their employees. The ones that do usually don’t last very long.


    4 September 2017 at 2:23 pm

  2. Tech workers may not want to join together to improve their lot, but many workers do not like the way they are treated. And I’m not sure tech workers are treated all that well, particularly if they have young children and their employer tacitly requires working 60-hour weeks.

    Still, Larry Summers was addressing workers in general, not the tech elite.

    It’s strange that companies that are enormously profitable for the owners still can’t find adequate money to pay employees a fair wage.


    4 September 2017 at 2:32 pm

  3. It sounds as though this article, “A New Type of Labor Law for a New Type of Workplace,” might be of interest.


    4 September 2017 at 6:26 pm

  4. An interesting read. Thanks for posting that. It looks like there is a movement to reform unions, just as in the Democratic and Republican parties. It is time. Many of our institutions are mired in the past and need to move forward to address the current realities. I wish them all luck.

    BTW – The NYT link did not work. I googled and found this one (.htm vs. .html):


    4 September 2017 at 8:06 pm

  5. Must have been a bad paste. I’ve fixed it now. Thanks for pointing it out. And I agree: unions in many cases have lost their way—police unions, for example. But also there are union problems in many areas. BTW, I highly recommend Which Side Are You On?: Trying to Be for Labor When It’s Flat on Its Back, by Thomas Geoghegan. Highly readable, very interesting.

    And there’s always Strike!, by Jeremy Brecher. See this post for details.


    4 September 2017 at 8:19 pm

  6. Wow, Jeremy seems like he really doesn’t like his job. Either that or someone whizzed in his cornflakes.
    Some companies really are that bad, run by plutocrats who don’t give a rat’s behind about their workforce. “This company just sucks the life out of people” is something I heard more than once at a particular employer. And a few times that was literally true. Unionizing that company would not have made things any better, and would probably have made life unbearable for the poor union officials. Unions have been very beneficial to other folks such as the coal miners, however. To assume unions, or anything else, are a panacea or the antichrist is misguided, black-and-white type thinking. The question “Which side are you on?” implies that we are restricted to an all or nothing choice, which isn’t the case at all.

    You have pointed out before how blindly following tax cuts as a solution for all the world’s ills failed. That kind of slavery to idealism, divorced from reality, does not serve the bluest states any better than it did the reddest states. ‘Is California finally reaching the breaking point?’ shows that resolutely following tax-and-spend also does not guarantee success ( In the same way, history has shown that unions are neither a universal solution nor an unadulterated evil. It looks like people are learning from recent events. Given the basic goodness of humanity, that gives cause for hope.


    4 September 2017 at 11:55 pm

  7. Gee, I thought Thomas Geoghegan’s Which Side Are You On: Trying to Be for Labor When It’s Flat on Its Back was really a charming book, and did discuss the problems of unions. I’m surprised you disliked it. For me, it explored both the strengths and weaknesses of the labor movement, along with its hopes and ideals. (I’m assuming that you read the book and did not judge it based on its title.)

    Certainly unions are not a panacea. That’s what I meant when I referred to police unions, and others (e.g., the Teamsters) have had bad days. OTOH, in some situations unions have worked well: in Las Vegas, for example, and in the movie industry.

    I hope I did not somehow convey the notion that I blindly support all unions regardless of their effect. As Geoghegan’s book shows, unions are a complex issue.


    5 September 2017 at 6:44 am

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