- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In the latest episode of “Pitchfork Economics,” Suresh Naidu, a professor of economics and public affairs at Columbia University, talks about the imbalance of power between employers and workers.
- That imbalance has only grown during the coronavirus pandemic, and collective worker action is the only way forward.
- Visit Business Insider’s homepage for more stories.
Economics as we know it has been around since the late 18th century, but the field still barely acknowledges the existence of power dynamics as a motivating force in the labor market.
Trickle-downers who oppose raising the minimum wage, for instance, will often suggest that workers who want a higher wage should simply quit their jobs and find a new employer who’s willing to pay their desired rate.
That might make sense in a simplified textbook object lesson, but it doesn’t work in the real world, where parents have to feed their children three times a day, and people who work at a manufacturing plant don’t have the funds to uproot their lives and move to another state when they want a raise.
In a perfect economic system, employers would need workers just as much as workers needed their employers.
In reality, workers are disposable and employers hold almost all of the power. This power imbalance has grown even wider since the coronavirus pandemic divided the American workforce into two groups: the mostly white-collar employees who have been comfortably working from home since March, and the mostly low-wage so-called “essential” employees who sell, deliver, and make the food and other supplies that the working-from-home crowd needs to perform their duties.
In this week’s episode of Pitchfork Economics, Nick Hanauer and David Goldstein talk with Suresh Naidu, a professor of economics and public affairs at Columbia University who is working on a book about the history of American labor markets. Naidu makes a clear case that those unspoken — and frequently unrecognized — power dynamics have endangered millions of low-wage American workers.
Even in a pandemic, with communities effectively relying on essential workers to get access to food and daily necessities, the new importance placed on these workers hasn’t given them more power.
“[T]hough the risks of being a worker in a grocery store or in a meat processing plant obviously shot up enormously during COVID,” Naidu said, “there is no evidence that wages were increasing to compensate these workers.”
In the perfect economic system that we hear about in Econ 101 classes, wages should have increased steadily in the days and weeks after the coronavirus lockdown as the need for workers to perform their duties increased. It’s true that a handful of workers received a few extra weeks of additional hazard pay, but most of those windows of a dollar or two extra per hour have long since expired, even as the risk of catching COVID persists.
Why didn’t worker pay increase for at least the duration of the pandemic?
Naidu says the answer is obvious: “The workers didn’t have any power. The bottom fell out of the labor market in COVID and so essential workers had nowhere to go,” he said.
If the workers quit their jobs because they felt unsafe, they wouldn’t be eligible for the expanded $600-per-week unemployment benefits that were available to workers in the beginning of the pandemic.
And it’s not like they can simply find higher-paying employment elsewhere: BLS data shows that at the height of the lockdown there were five unemployed Americans per job opening, so coronavirus transformed a tight job market into one in which employed people feel lucky to have regular income.
Was the power dynamic different before COVID, when unemployment was nearing record lows?
“When the labor market gets so tight that nobody cares about losing their job because there’s another job for them to go to, employers lose the power they have to threaten workers with unemployment,” Naidu said. The Chicago cocktail waitress who allegedly spit at Eric Trump in June of 2019 is “what 3% unemployment looks like,” Naidu jokes.
But low unemployment still didn’t result in higher wages for employees because the power was still imbalanced.
“Even when the labor market is really tight,” Naidu said, employers “don’t necessarily want to raise wages because they’re making profits off every worker when they’re keeping the wage low.”
So even though a tight labor market will increase employee turnover, employers have found that the costs of hiring and training new employees are lower than the money they’re making from low wages. In that case, employee power is held artificially low while employer power is strong — and continues to grow along with their profits. So in good times and in bad, the power dynamic in the workplace has become so uneven that American employers win either way.
The question now is how to rebalance those scales — to put more power into the hands of American workers.
While policies like raising the minimum wage and providing more legal protections for workers help, Naidu said “there’s not a policy fix” that can provide all the protections workers used to enjoy.
He believes that collective worker action is the only progressive way forward. “There’s really no substitute for people getting together,” Naidu said, adding, “the right has money, the left has people.”
Naidu acknowledges that the way forward might not resemble the labor unions of the 20th century.
“They can be all kinds of other organizations like community groups, data unions,” he said, but he deeply believes that “we’re going to have to solve this ourselves.”