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Friday, April 03, 2015

Paul Krugman: Power and Paychecks

Workers need more bargaining power:

Power and Paychecks, by Paul Krugman, Commentary, NY Times: On Wednesday, McDonald’s — which has been facing demonstrations denouncing its low wages — announced that it would give workers a raise. The pay increase won’t, in itself, be a very big deal... But it’s at least possible that this latest announcement, like Walmart’s much bigger pay-raise announcement a couple of months ago, is a harbinger of an important change in U.S. labor relations.
Maybe it’s not that hard to give American workers a raise, after all.
Most people would surely agree that stagnant wages, and more broadly the shrinking number of jobs that can support middle-class status, are big problems for this country. But the general attitude to the decline in good jobs is fatalistic. Isn’t it just supply and demand? Haven’t labor-saving technology and global competition made it impossible to pay decent wages to workers unless they have a lot of education?
Strange to say, however, the more you know about labor economics the less likely you are to share this fatalism. For one thing, global competition is overrated as a factor in labor markets... And the evidence that technology is pushing down wages is a lot less clear than all the harrumphing about a “skills gap” might suggest.
Even more important is the fact that the market for labor isn’t like the markets for soybeans or pork bellies. Workers are people; relations between employers and employees are more complicated than simple supply and demand. And this complexity means that there’s a lot more wiggle room in wage determination than conventional wisdom would have you believe. We can, in fact, raise wages significantly if we want to....
Suppose that we were to give workers some bargaining power by raising minimum wages, making it easier for them to organize, and, crucially, aiming for full employment rather than finding reasons to choke off recovery despite low inflation. Given what we now know about labor markets, the results might be surprisingly big — because a moderate push might be all it takes to persuade much of American business to turn away from the low-wage strategy that has dominated our society for so many years. ...
The pay raises at Walmart and McDonald’s — brought on by a tightening job market plus activist pressure — offer a small taste of what could happen on a vastly larger scale. There’s no excuse for wage fatalism. We can give American workers a raise if we want to.

    Posted by on Friday, April 3, 2015 at 02:45 AM Permalink  Comments (129)


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