Lawrence Summers discovers bargaining power
Lawrence Summers discovers bargaining power
Mainline macroeconomics pretends to be “value neutral,” by which practitioners mean that they assign no moral value to the supply or demand curves to the participants in the economy: they simply exist. The question of *why* participants in the economy have particular supply and demand curves is simply not even in the universe of parameters.
But in my experience “why” participants in an economy are willing to pay x amount for y good or service most often comes back to bargaining power. My ability to coerce if necessary a particular outcome comes down to the financial ability to walk away from the transaction. Or, as I have quoted a few times before, “Thems that has, git’s.”
Yesterday the following abstract of a new economic paper, “The Declining Worker Power Hypothersis,” from Lawrence Summers and Anna Stansbury came across the transom:
Rising profitability and market valuations of US businesses, sluggish wage growth and a declining labor share of income, and reduced unemployment and inflation, have defined the macroeconomic environment of the last generation. This paper offers a unified explanation for these phenomena based on reduced worker power. Using individual, industry, and state-level data, we demonstrate that measures of reduced worker power are associated with lower wage levels, higher profit shares, and reductions in measures of the NAIRU. We argue that the declining worker power hypothesis is more compelling as an explanation for observed changes than increases in firms’ market power, both because it can simultaneously explain a falling labor share and a reduced NAIRU, and because it is more directly supported by the data.
Hoocoodanode?!?
I’ve watched Summers for a while and he seems for some time now to have (hopefully) anticipated a “awakening” trend (hard to see much of the trend from here) that understands it’s all about bargaining power — not to mention the concomitant political power that goes with labor organization. Kevin Drum at Mother Jones has got the idea too. (I start every day with Kevin Drum — https://www.motherjones.com/kevin-drum/ )
Here is SEIU’s Andrew Strom’s take which he posted on On Labor couple of years ago — and went away and never did anything to promote. This is the beginning and the end; the alpha and the omega of union rebuilding in America — or could be if anybody pushed it. Union density could be rebuilt to even unprecedented levels overnight. Advocating regularly scheduled union cert/recert/decert elections at every private workplace would make Democrats the automatic winner in battleground states.
https://onlabor.org/why-not-hold-union-representation-elections-on-a-regular-schedule/
Why do you think those states strayed? It was because Obama and Hillary had no idea what they need. Voters had no idea what they SPECIFICALLY needed either — they had be deunionized so thoroughly over such a long period (frogs in the slowly boiling pot).
In 1988 Jesse Jackson took the Democratic primary in Michigan with 54% against Dukakis and Gephardt. Obama beat Wall Street Romney and red-white-and-blue McCain in Wisconsin, Ohio and Michigan.
Now that we know that voters want what Strom proposed, how about taking the easy path to victory in November — and the path to permanent (German style labor union led) prosperity for the foreseeable future. It’s all right here — again:
https://onlabor.org/why-not-hold-union-representation-elections-on-a-regular-schedule/
A universal basic income changes bargaining power as well. And it also lots of people who are unable to participate to participate in the labour for a number of reasons (including lack of demand – but also other factors like care duties and illness or incapacity).
I am an elderly rust belt accountant, no PhD and no chair at Harvard, and I knew all of this 20 years ago when the really smart people gutted the rust belt to build foreign economies into outposts of inexpensive manufacturing.