Weakened Unions Explain Stagnant Wages
Organized labor once won raises for workers that they couldn’t bargain for on their own.
The union made them strong.
Source: Bettmann/Getty ImagesAlan Krueger, the Princeton economist, gave a luncheon talk last week at the Kansas City Federal Reserve’s Jackson Hole conference about slow wage growth in the otherwise hot U.S. economy. Economists used to assume that when unemployment is as low as it is now — 3.9 percent — the law of supply and demand would kick in, and force wages up as companies competed for workers.
But that hasn’t happened, so economists have been left to come up with new theories. One popular thesis is that the rapid concentration of companies — as well as the rise of dominant corporations like Amazon.com Inc. and Apple Inc. — has given rise to monopsony power, meaning that sellers (or employees) have no options other than dealing with one dominant buyer. And companies have used that monopsony power to pay workers less than they might if a true supply-demand dynamic were in place.