WEBVTT - Anna Stansbury on How to Boost Worker Bargaining Power 0:00:09.920 --> 0:00:13.280 Hello, and welcome to another episode of the All Thoughts Podcast. 0:00:13.320 --> 0:00:16.760 I'm Tracy Alloway and I'm Joe Wisen't thal, Joe. I 0:00:16.800 --> 0:00:19.640 feel like it's been a while since we've talked about 0:00:19.640 --> 0:00:23.079 the labor market. Yeah, that's right. I mean, so you know, 0:00:23.200 --> 0:00:26.079 for years, look, my favorite day of the year for 0:00:26.920 --> 0:00:29.960 the month was always the Non Farm Perils Report. But 0:00:30.160 --> 0:00:34.080 even you know, and it has political significance as economic significance, 0:00:34.120 --> 0:00:37.360 it has market significance. But of course, like this year, 0:00:38.159 --> 0:00:41.159 like inflation Day is the news. You know, that's the 0:00:41.240 --> 0:00:43.519 day that everyone cares about when the CPI report comes out. 0:00:43.800 --> 0:00:46.240 So I think it sort of speaks to how, yes, 0:00:46.560 --> 0:00:50.440 unemployment rate is really low, but the centrality of like 0:00:50.520 --> 0:00:53.760 certain labor market indicators at least has sort of declined 0:00:53.800 --> 0:00:55.560 a little bit, you would seem. Yeah, but you could 0:00:55.640 --> 0:00:59.080 make an argument that inflation Day is kind of jobs 0:00:59.120 --> 0:01:02.880 and wages Day, right, because there's all this focus on 0:01:02.920 --> 0:01:06.840 inflation at the moment, and clearly central banks don't want 0:01:06.840 --> 0:01:09.679 inflation to become entrenched. One of the ways it becomes 0:01:09.760 --> 0:01:13.400 entrenched is when everyone starts asking for a pay rise 0:01:13.440 --> 0:01:16.280 to offset the higher cost of living. Wages start to 0:01:16.280 --> 0:01:19.240 go up, and then you get that self reinforcing cycle. 0:01:19.360 --> 0:01:23.600 It's this really strange thing because obviously, why do we 0:01:23.640 --> 0:01:26.679 worry about high inflation. Well, because it's like it worsens 0:01:26.880 --> 0:01:30.959 buying power. Yeah, but then everyone wants to raise and yeah. Well, 0:01:31.000 --> 0:01:34.800 but then also it's like people sometimes express relief at 0:01:34.880 --> 0:01:38.639 wages not accelerating too much, right, or people express relief 0:01:38.680 --> 0:01:40.920 that maybe the labor market is cooling down a little bit. 0:01:40.959 --> 0:01:42.480 It's like, wait, but I thought the whole reason we 0:01:42.480 --> 0:01:45.119 were worried about inflation is because we were worried about 0:01:45.120 --> 0:01:48.520 what it means for households. It's it creates all kinds 0:01:48.560 --> 0:01:51.800 of tricky things. But yes, of course you point out 0:01:51.880 --> 0:01:56.600 inflation is eating into people's incomes. Yeah, so that's definitely 0:01:56.640 --> 0:01:58.520 one reason to care about what's going on in the 0:01:58.560 --> 0:02:01.680 labor market and with wages. The other reason to be 0:02:01.760 --> 0:02:05.360 talking about it is because after the pandemic, and this 0:02:05.440 --> 0:02:08.880 is where our previous episodes on this topic came in, 0:02:09.280 --> 0:02:12.000 there was, I don't want to say an expectation, but 0:02:12.080 --> 0:02:15.520 there was a thought developing that maybe this would mark 0:02:15.600 --> 0:02:18.960 some sort of moment, some sort of change in the 0:02:19.040 --> 0:02:24.920 relationship between workers and bosses or their corporate employers, like 0:02:25.240 --> 0:02:28.240 the balance of power would swing back to the average 0:02:28.240 --> 0:02:31.200 wage earner and we'd finally see salaries start to go 0:02:31.280 --> 0:02:34.040 up in a way that they hadn't really for most 0:02:34.120 --> 0:02:37.079 of the time after the financial crisis. Right, So that 0:02:37.200 --> 0:02:40.600 was the story of the tens. The sluggish labor market, 0:02:40.800 --> 0:02:45.240 poor wage growth, just sort of general like seeming like 0:02:45.280 --> 0:02:49.320 a decline and working worker bargaining power, an acceleration of 0:02:49.360 --> 0:02:52.080 a very long term trend of measures of labor share 0:02:52.120 --> 0:02:55.000 of the national income declining. And then in the middle 0:02:55.000 --> 0:02:59.079 of when we started getting all the early one really 0:02:59.080 --> 0:03:01.120 when we started getting all the is like stories about 0:03:01.120 --> 0:03:03.480 like companies having trouble hiring, and that was like the 0:03:03.560 --> 0:03:06.200 first real theme. There's like something that's different. It's like, wait, 0:03:06.200 --> 0:03:08.840 are we gonna have a trend change here? Could we 0:03:08.919 --> 0:03:14.880 have like a meaningful reversal of decades of declining labor share? 0:03:16.000 --> 0:03:17.640 And I think, you know, there was a lot of 0:03:17.680 --> 0:03:20.480 optimism right somewhere. I think we had a lot of 0:03:20.520 --> 0:03:22.840 like optimistic guests who are like, this is going to 0:03:22.880 --> 0:03:24.840 be the start of something different. Of course, the market 0:03:24.880 --> 0:03:29.079 was going up, and then with inflation eating into those 0:03:29.120 --> 0:03:32.360 wage games, and then the FED basically saying we were 0:03:32.360 --> 0:03:35.200 wrong about transitory inflation. We're going to hike fast. I 0:03:35.200 --> 0:03:37.880 think a lot of that optimism has gone away about him, 0:03:38.040 --> 0:03:40.440 and so the question is where do we stand. I'm 0:03:40.480 --> 0:03:43.400 just thinking, like, what counts for optimism nowadays? Is someone 0:03:43.480 --> 0:03:45.640 coming on and saying this is like the great plague 0:03:46.440 --> 0:03:48.000 of the Middle Ages, and we're going to see a 0:03:48.000 --> 0:03:52.080 similar shift in the counts of power towards people. Okay, well, 0:03:52.480 --> 0:03:55.280 all right, this is all good context. We're going to 0:03:55.360 --> 0:03:59.480 be going back to the labor market question, the wages question, 0:03:59.560 --> 0:04:03.360 which it and feeds into issues over inflation and things 0:04:03.400 --> 0:04:06.240 like that. We're going to be speaking with Anna Stansbury. 0:04:06.320 --> 0:04:10.160 She's an economist who specializes in labor and macro economics 0:04:10.480 --> 0:04:13.120 and also an assistant professor at m I T. Sloan 0:04:13.320 --> 0:04:17.200 whose work is basically all about this. Anna, thank you 0:04:17.240 --> 0:04:19.240 so much for coming on our thoughts. Thanks so much 0:04:19.240 --> 0:04:23.159 for having me. So your research is all about labor 0:04:23.240 --> 0:04:26.839 market forces and the sort of balance of power between 0:04:26.880 --> 0:04:30.280 the employee and the employer. How do we actually go 0:04:30.360 --> 0:04:34.400 about measuring worker power? What do you look at? Well, 0:04:34.400 --> 0:04:36.360 it's a bit of an amorphous concepts and I think 0:04:36.400 --> 0:04:39.920 different people define it different ways. What we do to 0:04:40.000 --> 0:04:42.599 look at work of power is we say work of power. 0:04:43.440 --> 0:04:46.000 The result of work of power is the ability of 0:04:46.000 --> 0:04:49.120 workers to share in the profits of the firm that 0:04:49.160 --> 0:04:52.200 they work at, above and beyond what would happen in 0:04:52.279 --> 0:04:55.440 some kind of market where their wages were just determined 0:04:55.480 --> 0:04:57.680 by the market or their compensation was just determined by 0:04:57.680 --> 0:05:00.120 the market. So in my work, when I'm trying to 0:05:00.160 --> 0:05:02.919 measure worker power, I'm trying to say, what would a 0:05:02.960 --> 0:05:07.000 given worker be paid in a kind of market situation 0:05:07.040 --> 0:05:09.280 without that power, And then how do different factors give 0:05:09.320 --> 0:05:11.160 that work of the ability to share in the profits 0:05:11.200 --> 0:05:14.719 of the firm. So one very obvious, very salient driver 0:05:14.839 --> 0:05:17.320 of worker power is unions. You know, being a member 0:05:17.320 --> 0:05:19.880 of a union that bargains over your compensation enables you 0:05:19.960 --> 0:05:21.960 to share, to some extent more in the profits of 0:05:21.960 --> 0:05:24.479 your firm. But there are other, less salient, harder to 0:05:24.520 --> 0:05:27.560 measure ways that worker power can exist. It can be 0:05:27.600 --> 0:05:30.960 things like norms around pay bargaining and around fairness. It 0:05:30.960 --> 0:05:34.040 can be things like how managers are incentivized to divide 0:05:34.080 --> 0:05:36.880 up the pie that the company creates between shareholders and workers. 0:05:37.240 --> 0:05:39.839 So there are very deferious different aspects that feed in. 0:05:40.000 --> 0:05:42.000 But I think that sharing in the profits of the 0:05:42.040 --> 0:05:44.239 firm above and beyond what would happen without that power 0:05:44.440 --> 0:05:47.520 is the is the ultimate indicator. So, you know, I 0:05:47.680 --> 0:05:50.360 mentioned that we had a number of sort of I 0:05:50.360 --> 0:05:54.960 would say, more optimistic sounding conversations last summer, like a 0:05:55.040 --> 0:05:57.720 year ago, and this hope that okay, this could be 0:05:57.760 --> 0:06:01.280 like a new day for or burgaining power and strength. 0:06:01.600 --> 0:06:04.560 And crucially, it wasn't really based on you know, there 0:06:04.640 --> 0:06:09.760 was no like fundamental change and unionization or unionization policy. 0:06:10.120 --> 0:06:12.920 There wasn't any like real major policy change. I think 0:06:12.960 --> 0:06:17.119 the optimism was simply labor market tightness, and that after 0:06:17.960 --> 0:06:22.120 the Great Financial Crisis and then a decade maybe or 0:06:22.200 --> 0:06:26.120 close to a decade of clearly the unemployment rate being 0:06:26.279 --> 0:06:28.640 over what it could have been, being over something that 0:06:28.680 --> 0:06:32.560 anyone would call unemployment, how much just just sort of 0:06:32.600 --> 0:06:37.839 like the cycle itself and the sustenance sustaining a strong 0:06:38.080 --> 0:06:41.560 economy or a strong labor market, how much of a 0:06:41.680 --> 0:06:45.599 role does that play potentially in shifting the balance of power. 0:06:46.080 --> 0:06:49.000 So I think it's important, And um, I was someone 0:06:49.040 --> 0:06:51.680 that was saying, you know, for for a long time 0:06:51.720 --> 0:06:54.920 in the pre pandemic era, as I was getting into 0:06:54.960 --> 0:06:57.640 this profession that it doesn't look like labor markets aren't 0:06:57.640 --> 0:06:59.560 tight enough, and they should be tight end they can 0:06:59.600 --> 0:07:02.960 be tight to And we saw that by February twenty 0:07:03.040 --> 0:07:05.279 they had got tight. The unemployment rate was down to 0:07:05.600 --> 0:07:08.800 the lowest level in its post war period, and even 0:07:08.839 --> 0:07:12.000 then there wasn't much evidence of inflation. So I think 0:07:12.040 --> 0:07:13.679 we might have been able to go tied to steal. 0:07:13.760 --> 0:07:16.040 So I think I think it does matter. It does 0:07:16.160 --> 0:07:19.640 matter a lot. The question as to whether it's on 0:07:19.720 --> 0:07:23.600 its own, is a sufficient driver of worker power to 0:07:23.680 --> 0:07:25.520 reverse some of the trends we've seen in the last 0:07:25.560 --> 0:07:29.120 forty fifty years, I'm less a strong believer in that hypothesis. 0:07:29.160 --> 0:07:32.360 I think tight labor markets are a necessary but not 0:07:32.440 --> 0:07:36.560 a sufficient factor. So just real quickly, in those months 0:07:36.600 --> 0:07:41.240 like nineteen when we had sub four unemployment, were we 0:07:41.800 --> 0:07:45.680 seeing evidence I mean, you say it's necessary but not sufficient. 0:07:45.960 --> 0:07:49.680 Were we seeing evidence pre pandemic of a tilt happening? 0:07:49.760 --> 0:07:52.400 Or was it too early to see the effects of 0:07:52.400 --> 0:07:57.080 those tightening labor markets in other measures of labor bargaining power. 0:07:57.320 --> 0:08:00.360 So in terms of the direct effect on things like ages, 0:08:00.440 --> 0:08:03.560 you did start to see the the tilt of wage 0:08:03.600 --> 0:08:06.920 growth switch. So when labor markets become tighter, typically that's 0:08:07.080 --> 0:08:10.680 disproportionately affecting lower income individuals who tend to have higher 0:08:10.720 --> 0:08:15.800 unemployment rates. Typically that's disproportionately infecting people from racial ethnic minorities. 0:08:15.960 --> 0:08:17.920 And you did start to see as the tilt of 0:08:18.000 --> 0:08:21.320 unemployment became less steep, the tilt of wage growth improved 0:08:21.320 --> 0:08:23.560 to benefit those groups. So you saw that effect directly 0:08:23.600 --> 0:08:26.240 happening already. The question I think you're asking is is 0:08:26.280 --> 0:08:30.480 it also feeding into other secondary factors of labor market power. 0:08:30.560 --> 0:08:33.920 Something like tight labor markets enable more worker activism and 0:08:33.960 --> 0:08:36.680 more unions because people are less worried about retaliation or 0:08:36.679 --> 0:08:41.080 losing their jobs. In the pre pandemic era, my senses, 0:08:41.160 --> 0:08:44.120 we didn't see a huge amount of a huge amount 0:08:44.160 --> 0:08:47.160 of change there. There was there were some in some 0:08:47.280 --> 0:08:50.600 waves of organizing in the summer of twenty nineteen. We 0:08:50.640 --> 0:08:52.920 can talk a bit more about what's been happening since 0:08:52.960 --> 0:08:55.559 the pandemic, but my sense was that the period probably 0:08:55.600 --> 0:08:57.760 hadn't been long enough and sustained enough at a very 0:08:57.800 --> 0:09:00.520 tight level for that to have really taken effect. So 0:09:00.840 --> 0:09:03.320 maybe before we dive into that, we could step back 0:09:03.360 --> 0:09:07.199 for a second, because the issue of stagnant wages, I mean, 0:09:07.200 --> 0:09:10.079 this has been going on for decades really, so even 0:09:10.160 --> 0:09:15.520 as productivity increases, workers seem to see less of a 0:09:15.640 --> 0:09:19.600 share of that of the benefits of that increased productivity. So, 0:09:20.040 --> 0:09:23.000 based on your research, you know, what's the explanation for that? 0:09:23.240 --> 0:09:26.679 Why have wages been stagnating for so long? So this 0:09:26.760 --> 0:09:29.120 is one of these questions in economics which is in 0:09:29.160 --> 0:09:32.839 some sense overdetermined. If you added up everyone's different explanations, 0:09:32.880 --> 0:09:35.760 you'd get more than of the of this gap. So 0:09:35.960 --> 0:09:38.439 different people will have different views as to what's important. 0:09:38.920 --> 0:09:43.440 The big three sets of factors that people think about 0:09:43.559 --> 0:09:48.440 largely fall into the buckets of technology, globalization, and institutions 0:09:48.440 --> 0:09:52.680 and norms, and so technology clearly plays a role in 0:09:52.760 --> 0:09:56.760 determining an important role in determining labor market outcomes and 0:09:56.800 --> 0:09:59.200 who's paid what. Part of the big part of this 0:09:59.280 --> 0:10:02.200 divergence to in pain productivity has been the fact that 0:10:02.559 --> 0:10:05.400 the incomes of lower middle income people haven't kept up 0:10:05.400 --> 0:10:07.960 with the incomes of high income people. Right, So there's 0:10:07.960 --> 0:10:10.280 a question about did the demand for skills change in 0:10:10.320 --> 0:10:12.679 a way that education didn't keep up with it? The 0:10:12.760 --> 0:10:16.040 race between education and technology. Almost surely that was a 0:10:16.080 --> 0:10:19.439 part of it. Almost surely for some workers, globalization was 0:10:19.480 --> 0:10:23.000 a part of it, increased competition from offshoring and manufacturing, 0:10:23.040 --> 0:10:25.600 although that the magnitude of that, I would I would 0:10:25.640 --> 0:10:28.319 put it relatively small. And then I think the big 0:10:28.400 --> 0:10:31.800 question is how much did institutions and norms and policies 0:10:31.840 --> 0:10:33.680 play a role. And this is where some of my 0:10:33.720 --> 0:10:35.320 work comes in to think about the role of the 0:10:35.320 --> 0:10:38.480 decline and worker power. In my work, including in a 0:10:38.520 --> 0:10:40.000 paper that I that I wrote with Larry sum Is 0:10:40.040 --> 0:10:42.040 a couple of years ago, we argued that the role 0:10:42.080 --> 0:10:44.280 of the decline and worker power was actually quite big 0:10:44.520 --> 0:10:47.640 in explaining this part of this divergence, That the declining unions, 0:10:47.920 --> 0:10:51.319 the decline in informal worker power and norms about fairness 0:10:51.320 --> 0:10:54.480 within firms, the rising sharehold of value maximization ideology and 0:10:54.480 --> 0:10:58.440 it's sort of attendant capital markets practices and corporate structures, 0:10:58.440 --> 0:11:00.760 that all of these played a role in e roading 0:11:00.800 --> 0:11:02.839 work of power in a way that actually does explain 0:11:02.880 --> 0:11:06.120 a large share of that gap. Alongside your more impersonal, 0:11:06.600 --> 0:11:10.640 large scale market forces of technology and globalization. When you 0:11:10.720 --> 0:11:15.480 talk about informal sources of worker power within firms and 0:11:16.320 --> 0:11:18.960 so called norms, What is it, what does that mean? 0:11:19.000 --> 0:11:21.240 What are we actually talking about, and how do you 0:11:21.520 --> 0:11:25.640 edit those factors? So I think it can be a 0:11:25.679 --> 0:11:29.320 few things. But we know that anyone who's ever you know, 0:11:29.880 --> 0:11:32.120 talk to HR or been in HR will know that 0:11:32.160 --> 0:11:34.840 there are lots of factors that determine how how pay 0:11:34.920 --> 0:11:37.480 is set for different people within a company. And some 0:11:37.520 --> 0:11:39.520 of them are to do with obviously what the person 0:11:39.800 --> 0:11:43.040 would earn elsewhere, whether they're likely to leave, how much 0:11:43.080 --> 0:11:44.640 you need to offer to to make them stay or 0:11:44.679 --> 0:11:47.080 to hire them. Of course, market forces matter, but there's 0:11:47.080 --> 0:11:49.080 often quite a lot of wiggle room within that, and 0:11:49.120 --> 0:11:51.280 that's where these norms can play a role. And in 0:11:51.320 --> 0:11:55.000 particular it can be things like a norm of how 0:11:55.080 --> 0:11:58.839 much the top executives and the CEO in particular should 0:11:58.840 --> 0:12:01.080 be paid relative to front and workers. You've seen the 0:12:01.080 --> 0:12:04.840 CEO to worker pay ratio absolutely explode in the last 0:12:04.840 --> 0:12:09.720 forty to fifty years, and if you look back at 0:12:09.840 --> 0:12:13.040 say the eighties, this was actually quite controversial in many 0:12:13.080 --> 0:12:14.920 circles in a way that it's not now. And I 0:12:14.960 --> 0:12:18.080 think things like whether or not it is perceived to 0:12:18.120 --> 0:12:20.719 be fair and okay, to have these big paid differentials 0:12:20.720 --> 0:12:24.400 within a firm actually does affect people's pay behavior. But 0:12:24.520 --> 0:12:28.080 more broadly, I think sometimes the the norms and the 0:12:28.559 --> 0:12:31.000 I guess what all might call ideology, but not in 0:12:31.160 --> 0:12:32.680 not in a critical way, just as a as a 0:12:32.679 --> 0:12:36.920 way of describing a school of thought around how how 0:12:37.000 --> 0:12:39.440 things should be structured. So that the rise of shareholder 0:12:39.520 --> 0:12:42.559 value maximization. Ideology was a school of thought that really, 0:12:42.960 --> 0:12:45.319 you know, it is in society's best interest for businesses 0:12:45.360 --> 0:12:48.920 to maximize shareholder value. That led to not only changes 0:12:48.960 --> 0:12:52.160 in norms, but also changes in the way companies structured themselves, 0:12:52.480 --> 0:12:56.119 things like fissuring of the workplace and outsourcing of employment, 0:12:56.320 --> 0:13:01.040 things like incentive structures from executives, things like leverage, buyouts, 0:13:01.040 --> 0:13:05.559 private equity, various capital markets structures that incent that incentivized 0:13:05.600 --> 0:13:08.240 management to follow shareholders interests. So I think there was 0:13:08.280 --> 0:13:11.200 a role in which these more informal, intangible things like 0:13:11.280 --> 0:13:16.920 norms and ideology also crystallized into formal physical structures and changes. 0:13:17.600 --> 0:13:19.760 So this is one of the reasons why your research 0:13:19.840 --> 0:13:22.280 is so interesting, because if you kind of follow it 0:13:22.400 --> 0:13:26.760 to its logical and extreme conclusion, you seem to be 0:13:26.760 --> 0:13:29.960 asking a question about whether or not capitalism is working 0:13:30.559 --> 0:13:34.400 for society, right, like companies being motivated by short term 0:13:34.400 --> 0:13:38.680 considerations and basically answering to their shareholders, which is something 0:13:38.720 --> 0:13:43.520 that is often at odds with the needs and requirements 0:13:43.559 --> 0:13:48.440 and happiness of their workforce. How are you thinking about that? Yeah, 0:13:48.480 --> 0:13:52.800 that's a big question, isn't it. I'm sorry, easy one 0:13:52.840 --> 0:13:55.719 for a for an afternoon. Okay, So yes, I mean 0:13:55.720 --> 0:13:57.320 I think you're right. That is at the heart of 0:13:57.360 --> 0:14:00.199 these questions. And I tend to shy away from using 0:14:00.240 --> 0:14:02.360 the word capitalism just because I think it means such 0:14:02.360 --> 0:14:05.400 different things to different people. Yeah, to what extent? To 0:14:05.480 --> 0:14:09.720 what extent does um the current structure of ownership and 0:14:09.800 --> 0:14:13.079 incentives and the determination of value, including the value of 0:14:13.160 --> 0:14:16.000 labor pay, How does that play out? And is this 0:14:16.000 --> 0:14:18.560 playing out in a socially beneficial way? That's that's what 0:14:18.600 --> 0:14:21.960 we're asking. And I think what what I tend to believe, 0:14:21.960 --> 0:14:24.040 and what I tend to believe based on the the 0:14:24.120 --> 0:14:27.800 research is that whether you think it's working depends a 0:14:27.800 --> 0:14:31.160 lot on what you think the baseline workings of an 0:14:31.160 --> 0:14:34.280 economy are, and in particular, how close do you think 0:14:34.320 --> 0:14:38.600 they would be to approximate the economists perfectly competitive ideal, 0:14:38.840 --> 0:14:40.320 So if you just bear would be for a second 0:14:40.360 --> 0:14:42.880 on that, So that would be perfectly competitive. Ideal would 0:14:42.880 --> 0:14:47.600 be in a world of perfect markets, the government would, 0:14:47.640 --> 0:14:49.640 you know, set the rules of the game. There would 0:14:49.640 --> 0:14:53.960 be property rights, transactions and contracts would be uniforced. Transactions 0:14:53.960 --> 0:14:58.680 could take place, and individual companies and workers will be 0:14:58.720 --> 0:15:00.800 competing with each other, and that the best, sorry, the 0:15:00.840 --> 0:15:02.640 worst products would be competed out of the market. The 0:15:02.680 --> 0:15:05.600 best products would survive. Prices would be low. Workers would 0:15:05.600 --> 0:15:08.560 always be competed for by companies, and so they would 0:15:08.600 --> 0:15:11.520 be paid the very highest possible value that companies can 0:15:11.640 --> 0:15:14.880 afford to pay for their skills and talents. And you've 0:15:14.920 --> 0:15:17.120 got this this market working in a very efficient way. 0:15:17.120 --> 0:15:18.680 And this is the kind of market that you start 0:15:18.760 --> 0:15:20.840 with an eCOM one oh one. And if that's the 0:15:20.880 --> 0:15:24.560 world that you think you're in, then a system where 0:15:25.160 --> 0:15:32.239 ownership of capital is what determines the allocation of economic activity. 0:15:32.600 --> 0:15:35.680 You know who's producing what, who is hired by whom. 0:15:35.800 --> 0:15:38.000 That system is going to be efficient. And you might 0:15:38.000 --> 0:15:40.160 not think it's going to result in an equitable distribution 0:15:40.200 --> 0:15:43.160 of income, but then you should redistribute afterwards, this classic 0:15:43.200 --> 0:15:45.240 separation of let the market do its work and then 0:15:45.280 --> 0:15:48.520 tax and transfer afterwards. If you think that the underlying 0:15:48.560 --> 0:15:50.320 market is actually not going to be very close to 0:15:50.360 --> 0:15:52.520 that perfectly competitive ideal, if you think it's going to 0:15:52.560 --> 0:15:56.320 be um, there's actually very difficult to search for a 0:15:56.360 --> 0:15:58.160 new job and find a new job, and these labor 0:15:58.200 --> 0:16:00.520 market frictions mean that once you're at a job, you're 0:16:00.560 --> 0:16:02.200 kind of at the mercy of your employer and they're 0:16:02.240 --> 0:16:03.880 not going to be paying you as much as they could. 0:16:04.080 --> 0:16:06.440 And if you think that actually the tendency in some 0:16:06.640 --> 0:16:09.600 markets is towards large companies and consolidation, and so there's 0:16:09.600 --> 0:16:12.480 not going to be this inherent drive towards the survival 0:16:12.520 --> 0:16:16.600 of the fittest and better, better products and an increased competition. 0:16:16.640 --> 0:16:19.520 If you think that's the sort of natural state of markets, 0:16:19.840 --> 0:16:22.960 then I think you're much more predisposed to ask about, well, 0:16:23.120 --> 0:16:25.760 is the allocation of economic activity that's created by these 0:16:25.760 --> 0:16:28.520 markets actually optimal or is there an imbalance of power 0:16:28.800 --> 0:16:30.800 that needs to be corrected. And that's where this question 0:16:30.840 --> 0:16:49.640 of lack of power for me comes in so obviously, 0:16:49.760 --> 0:16:52.280 and you mentioned it, and it's a really important part 0:16:52.280 --> 0:16:55.080 of your thesis. Part of the decline in work or 0:16:55.160 --> 0:16:58.480 power has been the major decrease over the last several 0:16:58.520 --> 0:17:03.200 decades in union density, and very different theories for why 0:17:03.280 --> 0:17:06.200 that is. But I mean, what is your story, why 0:17:06.359 --> 0:17:11.199 has union density gone down? And are there policies that 0:17:11.280 --> 0:17:14.400 could reverse it. So the way I like to look 0:17:14.440 --> 0:17:17.160 at this and a lot of kind of big economic 0:17:17.240 --> 0:17:19.560 data stories, is so just look over time and across 0:17:19.600 --> 0:17:22.760 countries as the very first pass. And if you do that, 0:17:23.040 --> 0:17:26.000 I think you can distinguish quite effectively between different stories 0:17:26.000 --> 0:17:29.000 of union decline straightaway. So the big story of union 0:17:29.000 --> 0:17:32.119 decline across industrialized countries in the last fifty years is 0:17:32.480 --> 0:17:36.720 basically all countries have seen some decline in union coverage 0:17:36.800 --> 0:17:38.880 the share of workers that are covered by a collective 0:17:38.880 --> 0:17:43.440 bargaining agreement. Basically all countries have seen some declining union membership. 0:17:43.800 --> 0:17:46.560 By the US in particular, the UK, which is where 0:17:46.560 --> 0:17:49.159 I'm from, to a lesser extent, have been at the 0:17:49.160 --> 0:17:53.320 extreme end. They've seen much sharper declines than almost anywhere else. 0:17:53.680 --> 0:17:56.120 So I think at that first past, then you say, okay, well, 0:17:56.440 --> 0:17:59.840 some portion of the decline and unionization is common to 0:18:00.000 --> 0:18:02.600 all countries, and maybe that makes it more likely to 0:18:02.680 --> 0:18:06.720 be some combination of these globalization and technology explanations. It's 0:18:06.760 --> 0:18:09.800 harder to maintain a unionized manufacturing sector when there's low 0:18:09.800 --> 0:18:14.040 wage competition from other countries, for example. But the portion 0:18:14.080 --> 0:18:15.760 that is unique to the U S and maybe the 0:18:15.880 --> 0:18:18.560 UK and a few other countries, that seems much more 0:18:18.600 --> 0:18:21.439 likely to be specific and therefore much more likely to 0:18:21.440 --> 0:18:23.520 be a function of policy and a function of norms. 0:18:23.800 --> 0:18:25.480 And in the US you can point to a lot 0:18:25.560 --> 0:18:29.000 of factors that led to a massive shift in the 0:18:29.040 --> 0:18:32.720 policy environment and in the public attitude towards unionization. And 0:18:32.920 --> 0:18:37.679 people always point to firing of the striking air traffic 0:18:37.680 --> 0:18:39.840 controllers by Reagan, for example, as a sort of water 0:18:39.920 --> 0:18:43.240 shared moment in setting the tone for what's acceptable in 0:18:43.320 --> 0:18:46.920 terms of corporate behavior towards people who are who are 0:18:47.000 --> 0:18:49.480 active in unions. So my view, my view is that 0:18:49.600 --> 0:18:52.000 a big portion, not all, but a big portion of 0:18:52.000 --> 0:18:54.560 the decline in unionization in the US has been a 0:18:54.600 --> 0:18:59.879 result of active hostility from business many businesses, obviously not 0:19:00.720 --> 0:19:04.480 from many businesses towards union organizing, and that this creates 0:19:04.520 --> 0:19:07.520 a kind of race to the bottom equilibrium where if 0:19:07.600 --> 0:19:10.399 you know that all your competitors are not going to 0:19:10.440 --> 0:19:14.040 be unionized. It becomes very very difficult for you as 0:19:14.040 --> 0:19:16.480 a business to be unionized because your cost are higher 0:19:16.480 --> 0:19:18.400 than everyone else's. And so then you get this race 0:19:18.400 --> 0:19:21.280 to the bottom dynamic where even if not all businesses 0:19:21.560 --> 0:19:25.160 want to be hostile towards union organizing and union activity, 0:19:25.480 --> 0:19:28.120 there becomes a competitive imperative to have to be. So 0:19:28.640 --> 0:19:31.879 that's where I think we've got to right now in 0:19:31.960 --> 0:19:34.080 terms of policies to change that. I think there's a 0:19:34.080 --> 0:19:36.320 lot that could be done, and you can think about 0:19:36.320 --> 0:19:40.320 it in two buckets. One bucket is within the current 0:19:40.840 --> 0:19:43.640 conception of what work of power is and what unions 0:19:43.680 --> 0:19:45.800 look like in the US. What could be done and 0:19:45.840 --> 0:19:48.560 what I mean there is unions typically bargain at the 0:19:48.640 --> 0:19:51.119 level of an establishment like a plant or a unit 0:19:51.359 --> 0:19:54.080 or a firm, and they typically bargain over pay and 0:19:54.160 --> 0:19:57.159 other job related attributes. And there there's a lot of 0:19:57.160 --> 0:20:00.080 reforms that could be done to increase penalties on firms 0:20:00.080 --> 0:20:04.879 for for cracking down on union organizing. There could be 0:20:05.080 --> 0:20:09.800 ways to make it easier for unions to share information 0:20:09.840 --> 0:20:11.680 with workers. So a lot of the reforms that were 0:20:11.680 --> 0:20:14.480 proposed in the Proact, for example, were things that we're 0:20:14.480 --> 0:20:16.800 trying to change how and when the firm versus the 0:20:16.880 --> 0:20:20.040 union can share information with workers about the union or 0:20:20.240 --> 0:20:23.520 persuade people to vote for or against the union. But 0:20:23.600 --> 0:20:26.080 in some ways, I think the more exciting portion is, 0:20:26.480 --> 0:20:28.640 and the more promising portion, if you want to see 0:20:28.680 --> 0:20:32.840 a big change, is trying to rethink the structure. And 0:20:32.880 --> 0:20:36.480 I'm very in favor of, or at least interested by 0:20:37.119 --> 0:20:39.520 changing the structure of worker power so that bargaining is 0:20:39.560 --> 0:20:42.040 done to a larger extent at a broader level, on 0:20:42.080 --> 0:20:44.760 a sectoral level, like I said, in much of continental Europe, 0:20:44.920 --> 0:20:49.040 which sets a kind of baseline wage floor, compensation benefits 0:20:49.040 --> 0:20:52.919 flow for a whole sector or occupation in a particular region, 0:20:53.359 --> 0:20:56.200 as well as with bargaining at the firm level. Could 0:20:56.200 --> 0:20:58.359 you talk a little bit more about the europe system 0:20:58.520 --> 0:21:02.760 versus the US system, because I'm not familiar with that. Yeah, 0:21:02.760 --> 0:21:05.720 of course, So just to take there's a lot of 0:21:05.760 --> 0:21:09.879 different variations on themes in different continental European country. So 0:21:09.920 --> 0:21:14.040 I'll take Germany as one example. So the German system 0:21:14.119 --> 0:21:17.560 um they call it codetermination, has worker power at essentially 0:21:17.640 --> 0:21:22.400 three different levels within within within companies and industries. One 0:21:22.480 --> 0:21:26.800 level is bargaining over largely pay, and this bargaining is 0:21:26.840 --> 0:21:30.879 done between the unions and confederation of employers at the 0:21:30.960 --> 0:21:33.919 level of the whole industry in a region. So there 0:21:33.920 --> 0:21:35.840 will be a bargain for the whole of the metal 0:21:35.880 --> 0:21:38.399 working industry in a certain region in Germany, and that 0:21:38.440 --> 0:21:40.679 will set a wage floor for the different types of 0:21:40.720 --> 0:21:44.160 workers in metalworking, so that that agreement will look quite 0:21:44.160 --> 0:21:46.199 like an agreement would look like at the level of 0:21:46.200 --> 0:21:48.040 a firm in the US, but instead it will apply 0:21:48.080 --> 0:21:51.960