Читать книгу Inequality and the Labor Market - Группа авторов - Страница 21

Discussions over weakening workers’ bargaining power—which is one of the imperfections in competition in labor markets—are part of a broader set of battles over making our economy more competitive, more efficient, and more fair. For instance, I have alluded to the lack of competition in product markets and the failures of antitrust policies to curb corporate market power.

The explosion of CEO compensation over the past four decades has called into question the idea that these salaries reflect productivity in American boardrooms. U.S. CEOs are paid much more than CEOs in other advanced countries: the average pay among U.S. CEOs at the top 350 companies was 300 times that of the average worker in 2017, up from 20 times in 1965 (Mishel and Schieder 2017). There is no evidence that American executives are that much more productive than their counterparts in other countries or than they were in the past; these compensation differentials can only be explained by unequal power—not by competition.

Careful analysis from Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva (2014) provides some insight into why executive compensation has increased. The economists analyzed the effect of cuts to top marginal tax rates across countries, specifically examining whether these cuts would increase investment—as standard neoclassical economic models would predict. It turns out the tax cuts did not have an impact on investment but did increase executives’ salaries. It seems that when top tax rates are lower and executives get to take home more of their pay, they have a greater incentive to exercise bargaining power and negotiate (with themselves and other members of the boards they typically help appoint) for higher salaries.

More broadly, lower corporate tax rates provide more incentives for rent-seeking, of which higher executive compensation is one example (Stiglitz 2012). But the additional aftertax profits give corporations more money with which to lobby to get their way.

In the past several years, despite high corporate profits and low unemployment rates, wages have remained fairly stagnant. Many observers have described this as a mystery. When unemployment is low, wages are supposed to rise. The mystery is easily solved when we understand that labor markets are not operating like textbook economic models—and the gap between those idealized models and reality has been increasing.

Market power allows firms to exploit workers directly, but also to translate outsized economic power into political power. Our political system, with unbridled corporate campaign contributions, allows corporate and financial firms disproportionate influence in shaping the rules and regulations to further enhance their power and profits. Indeed, on the flipside of rising employer power, we have witnessed policy choices that have systematically undermined the power of workers.