Bargaining Power

I got a question the other day about what does it mean to strengthen workers' "bargaining power" in a policy context. Does that just mean more union density? Well it certainly could, but I think the biggest impacts of unions are on voice and politics not aggregate labor market outcomes (this is probably worth a post of its own).

We should probably just start by thinking of bargaining power pretty literally. Your bargaining power is pretty directly related to your ability to say "hey, f— you, I quit!" What are the main barriers to quitting? Obviously right now, high unemployment is a huge barrier. Macroeconomic policymakers need to take full employment seriously. Health care is also a huge issue in the United States that makes workers more risk-averse about quitting than they would be under either left-wing or right-wing alternatives to the status quo. The regulatory complexity of starting a small business is another issue. People who own their own businesses are happier than the rest of us, so employees of firms ought to get paid a premium. But in an environment when regulatory agencies can't even tell you what you need to do to comply with their business-starting regulations this channel doesn't operate optimally. Education matters. There are lots of illiterate people in the United States, and if you can't read it's hard to find out about possible job opportunities. Then there are barriers to mobility. Housing costs in high-productivity metro areas are higher than they need to be, which is a barrier to quitting your job to strike out for brighter prospects elsewhere. Last, the US is very weak in terms of "active labor market policies" and continuing vocational education. Our current landscape is quite punitive toward people who made choices in their late teens and early twenties that didn't work out well and provides very little opportunity to revise one's approach later.

Last, the right kind of immigration policy matters, though not in the way that people often seem to think. If we flooded the market with monolingual English speaking high-school graduates lacking in other kinds of specialized skills, that would be a big problem for the typical American. But obviously that's (rightly) not what our existing policies do. We ought to keep on not doing that (sorry, Bahamians) to a greater extent by creating a legal flow of low-skill monolingual Spanish speakers and creating a new flow of higher skilled individuals.