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Labor Market Liberation

Capitalists want to make the quality of life better for the labor force by freeing up the labor market.

Today, employers are hiring and pushing unemployment rates to record lows, but the fact is that wages aren’t rising as fast as they have in the past, so why does the law of supply and demand not apply to the U.S. labor market?

More and more people believe that the labor market isn’t free.

If this is true of the labor market, how do we fix it?

By addressing key labor market issues, we can help millions of Americans reap the full benefits of economic growth.

Yes, the U.S. has a large and efficient labor market. The fact that it is all too often taken for granted by the government.

Companies have to compete for these workers across the nation, though today’s labor market is less willing to relocate and usually, they aren’t far from their place of work.

This has made industry much more concentrated, so much more than many areas and professions have only a few relevant employers. This causes companies to develop a greater hold on their respective labor market.

This is called “monopsony power”.

It is the ability of a company to control the price of inputs, such as labor, below what a truly free labor market would indicate.

A 2017 study revealed that the pay for similar jobs was as much as 25% lower in commuting zones with higher employer concentration.

Another study found this effect is to be the strongest in locales where foreign competition is strong and unions are weak.

Companies are now finding other ways to strengthen their labor bargaining power.

Since 2016, as much as 58 percent of major franchisers use a “no-poaching” contract which stops franchisors from hiring each other’s employees.

Franchisors like McDonald’s and H&R Block have recently agreed to stop poaching altogether.

More and more employers are requiring their workers to sign a non-compete agreement which prevents them from seeking better pay at rival firms.

What is a solution for workers to get just pay?

Maybe it’s expanding their options for one. Perhaps further breaking down barriers to mobility or improved government benefit programs.

Or maybe put an end to senseless licensing requirements or exclusionary residential zoning rules.

Changing these is part of the labor market solution, while the goal is to make it easier for workers to change occupation and gain the opportunity to better seize an economic advantage.

Another important factor is to have Congress enforce no-poaching agreements.

Non-competes are defensible, especially when a company invests in their employee’s skills. Even the proprietary information that may be at risk is being considered.

Really what needs to happen is for companies to not be able to build a monopsony power right from the get-go. We can still maintain competitiveness in the workforce but wages need to be more closely observed.

Capitalism can only succeed when its benefits are distributed broadly, fairly, and freely. Let’s free up the labor market in the US and spread beneficial economic growth more widely?


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