Biden’s Attention To Working Families — Evident In Policies And Rules — Helps Stabilize The Economy

There is no denying that the Biden Administration is pro working families. Take the Infrastructure Act which focuses on onshoring — bringing and keeping jobs in the United States. Take another look at the Federal Trade Commission (FTC), which is taking a pro-worker leap by exposing non-compete clauses — clauses which prevent millions of workers from taking a job with higher pay from a similar employer to the one they have now.

Corporations use other sources of power to underpay and disempower workers, so the Department of Justice (DOJ) and the FTC are consulting with worker representatives on the effect on workers of creating ever-bigger corporations. For too long, the DOJ and FTC mainly considered the short-term effect on prices. Regulators are seeking ways to rebalance the scales of power. University of Utah Professor Marshall Steinbaum recommends that merger reviewers protect collective bargaining, since unions are one of the most effective ways to correct undue monopsony corporate power. That power matters because agencies once celebrated merger ‘efficiencies’, which translated to big firms slashing worker pay and speeding up work, amounting to labor exploitation.

Evaluating the effect of mergers on labor markets is in the Clayton Antitrust Act of 1914. Section 7 of the Clayton Act states that “the labor of a human being is not a commodity or article of commerce.” Over time the principle got ignored in merger review.

Beyond mergers that accumulate power are efforts by large corporations to dominate small businesses, misclassify workers as independent contractors, and outsource core operations to lower-wage non-union vendors. Unions help stop those practices. Rule-making and enforcement against unfair methods of competition under the FTC’s Section 5 authority also helps reduce labor exploitation.

Big Can Be Better if Workers Have Countervailing Power

Super firms in capital intensive industries are generally more innovative and conduct high levels of research and development. Without a union to serve as a countervailing power, super firms would shift profits to owners, raise manager salaries, buy back shares, and sit on idle cash. Workers could leave to seek better wages, but as super firms grow they dominate the labor market. Workers are stuck and accept lower pay for their productivity.

A union in a concentrated sector takes wages and other basic terms of employment out of competition and no firm is incentivized to compete for lowest pay and worse working conditions. Paying workers well becomes part of the business model of all members of the sector.

And there isn’t just one path for workers to raise wages. Many industries like truck drivers and warehouse workers, clothing and textile workers, construction workers, mine workers, janitors and home health workers are employed by uncoordinated small businesses. A union helps employers get on the same page, improve their training, and have a steady labor force to rely on. No one firm is driving towards the bottom.

There are many paths for unions to share and create economic rents and productivity outside of vertically integrated oligopolies and collective bargaining. As Sandeep Vaheesan notes, “But right now, we seem to have the worst of both: Very large firms that wield awesome power and dominate their small firm satellites.”

Industrial Policy Doesn’t Work Without Industrial Relations

My coauthor Richard McGahey and I argue in favor of Harvard Economist John Kenneth Galbraith’s vision of a postwar U.S. economy that embedded “countervailing power” institutions in the form of unions and collective bargaining in industrial policy, thus making America the world’s leading post- WWII economy. Working households had decent incomes to buy houses and big firms were successful. Industrial policy embedded industrial relations. Industrial relations is the conscious effort to make sure unions can bargain with big and powerful employers to share wealth and stabilize production.

Historian Nelson Lichtenstein is a cheerleader for big firms. A giant vertically-integrated oligopoly takes much more responsibility for the supply chain’s health and safety problems and minimizes some other forms of worker exploitation and abuse.

Brian Callaci and Sandeep Vaheesan at Open Markets Institute describe how Biden’s antitrust and labor agencies can rein in abusive independent contractors and franchise rules to protect workers who are misclassified. And there are signs that the Biden Administration is making such moves by cracking down on franchisors exerting undue control over franchisees and workers.

David Madland from the Center for American Progress points to the European Union’s breakthrough in forming newish structures for unions — sectoral bargaining, through which unions wouldn’t bargain firm by firm but would set standards for the whole sector. In the U.S. that would mean that Mount Sinai Nurses bargaining for pay and working conditions would set standards for all nurses in New York metro area. An efficient and fair system for everyone.

Workers at the Table Can Help Rebalance the Economy

Communications Workers of America President Chris Shelton argues in The Hill that “labor considerations have for too long been absent from antitrust decisions even though mergers hurt workers. The Microsoft
MSFT
/Activision deal, though not yet completed, could be the example that things can be better. Microsoft — aware of the FTC’s pro-worker concern — negotiated an unprecedented labor neutrality agreement, which, if the merger is approved, would give workers a fighting chance to unionize.

Today regulators and policymakers can address power imbalances in markets and grant workers their rightful place at the antitrust table.

My colleague Nell Geiser, Director of Research for the Communications Workers of America, and I cowrote a longer version of this essay.