A Deliberate Biden Order Goals to Tilt the Job Market Towards Employees

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An increasingly influential mindset in left-of-center business circles is that corporate mergers and some other common business practices have put American workers at a disadvantage. The government, according to this theory, should deal with it.

It appears that the school has a particularly powerful student: President Biden.

In this week, the White House plans to enact a competition-policy-oriented implementing regulation. Those familiar with the order say that a section contains several provisions aimed at increasing competition in the labor market.

The order will encourage the Federal Trade Commission to prohibit or restrict non-compete obligations, which employers have increasingly used in recent years to try to impede workers from quitting for a better job. It encourages the FTC to ban “unnecessary” restrictions on professional licensing that can make it difficult to find new work, especially across state lines. And it encourages the FTC and the Department of Justice to further restrict employers’ ability to share information about employee remuneration in a manner that could amount to collusion.

In a broader sense, the executive order encourages antitrust authorities to examine how mergers could contribute to what is known as monopsony – conditions under which workers have few choices about where to work and therefore have no leverage to negotiate higher wages or better benefits.

The order will depend on the ability of regulators to implement the rules sought by the White House and to articulate them to withstand legal challenges. And many of the policies that labor economists see problematic, including licensing requirements, are set at the state level, leaving a limited federal role.

Still, the proposed arrangement is the most concerted effort in recent times to harness the power of the federal government to tip the playing field in the direction of workers. It builds on years of research that has found its way from the intellectual fringe to the mainstream.

“It is increasingly recognized that a lack of competition has depressed wages and that the government has room to improve,” said Jason Furman, who served as chairman of the White House economic adviser during the Obama administration’s second term. “I don’t think addressing competition issues will miraculously change inequality in this country, but it will help. The government should be by your side on wages. “

The council published research on these issues towards the end of the Obama presidency, but concrete policy action has been more limited than what the Biden administration seeks to pursue. As Vice President, Mr. Furman recalled, Mr. Biden was particularly motivated by issues related to collective bargaining and non-compete agreements.

Even with White House support, there remains a significant gap between the insights of academics studying the labor market and the laws governing the relationship between companies and their employees.

Ioana Marinescu, an economist at the University of Pennsylvania, analyzed data on 8,000 specific labor markets with two co-authors and found that a labor market that was highly concentrated in a few employers resulted in wages falling by 5 to 17 percent.

Updated

July 6, 2021, 8:19 p.m. ET

However, she said that due to a lack of legal precedents, regulators tend to be cautious about blocking a merger due to its potential labor market impact.

“Legally we are on solid ground, but it may be that a certain judge who has this on his desk sees it that way or not,” said Professor Marinescu. “This poses a risk for the agency, which doesn’t like the idea of ​​losing a case.”

She said pressure from the White House would help pursue these legal theories, but that a law in Congress specifically asking antitrust authorities to focus on labor market conditions would help more.

There has been some bipartisan discussion about non-compete restrictions on Capitol Hill, especially after the emergence of some outrageous stories. (For example, sandwich shops and hair salons have contractually prohibited workers from going to a competitor.) These disputes tend to turn incumbents – who don’t want their workers to quit with potentially valuable information – against startups who want to. play off more ability to hire people at will.

Professional accreditation is also an area of ​​potential for bipartisan agreement that brings together those who want wider job opportunities with those who oppose excessive regulation. Professional licenses are required for many more jobs than in decades past, and typically a license in one state is not readily transferable to another, which may give workers the opportunity to move to places where they can earn more restricts. This is especially problematic for military families who typically have no choice but to move regularly.

Still, there are potential negative effects of the Biden approach. By creating a barrier to entry for workers entering a field, licensing can also keep wages higher for existing workers in those occupations, meaning that some individuals may lose if the requirements are lifted. In addition, research by Peter Q. Blair of Harvard and Bobby Chung of the University of Illinois suggest that women and ethnic minorities experience less wage differentials in areas that involve professional licenses.

All together, and the Biden government’s push for a more competitive, less business-friendly labor market is definitely not a magic bullet policy that suddenly gives workers more market power overnight.

Rather, it is part of a series of guidelines – including other aspects of the president’s agenda – that, over time, would move the balance of power away from the prevailing order of most of the past 40 years.