Kate Bahn testimony before the Joint Economic Committee on monopsony, workers, and corporate power [feedly]

Kate Bahn testimony before the Joint Economic Committee on monopsony, workers, and corporate power
https://equitablegrowth.org/kate-bahn-testimony-before-the-joint-economic-committee-on-monopsony-workers-and-corporate-power/

Kate Bahn
Washington Center for Equitable Growth
Testimony before the Joint Economic Committee,
Hearing on "A Second Gilded Age: How Concentrated Corporate Power Undermines Shared Prosperity"

July 14, 2021

Thank you Chair Beyer, Ranking Member Lee, and members of the Joint Economic Committee for inviting me to testify today. My name is Kate Bahn and I am the Director of Labor Market Policy and the interim Chief Economist at the Washington Center for Equitable Growth. We seek to advance evidence-backed ideas and policies that promote strong, stable and broad-based growth. Core to this mission is understanding the ways in which inequality has distorted, subverted and obstructed economic growth in recent decades.

Mounting evidence, which I will review today, demonstrates how the rising concentration of corporate power has increased economic inequality and made the U.S. economy less efficient. Reversing the trends that have led to a "second gilded age" is critical to encouraging a resilient economic recovery following the pandemic-induced economic crisis of 2020 and encouraging a healthy, competitive economy for the future.

Introduction

The United States boasts one of the wealthiest economies in the world, but decades of increasing income inequality, job polarization, and stagnant wages for most Americans has plagued our labor market and demonstrated that a rising tide does not lift all boats. Furthermore, economic evidence demonstrates how inequality results in an inefficient allocation of talent and resources while increasing corporate concentration that enriches the few while holding back the entire economy from its potential. Understanding the causes and consequences of the concentration of corporate power will guide policymaking in order to ensure that the economic recovery in the next phase of the pandemic will be broadly shared and ensure a more resilient economy.

"Monopsony" is a key economic concept to understand in this discussion. Monopsony is the labor market equivalent of the better-known phenomenon of "monopoly," but instead of having only one producer of a good or service, there is effectively only one buyer of a good or service, such as only one employer hiring people's labor in a company town. Like in monopoly, this phenomenon is not limited to when a firm is strictly the only buyer of labor. Today I will explain the circumstances and effects of employers having significant monopsony power over the market and over workers.

When employers have outsized power in employment relationships, they are able to set wages for their workers, rather than wages being determined by competitive market forces. Given this monopsony power, employers undercut workers. This means paying them less than the value they contribute to production. One recent survey of all the economic research on monopsony finds that, on average across studies, employers have the power to keep wages over one-third less than they would be in a perfectly competitive market. Put another way, in a theoretical competitive market, if an employer cut wages then all workers would quit. But in reality, these estimates are the equivalent of a firm cutting wages by 5 percent yet only losing 10 percent to 20 percent of their workers, thus growing their profits without significantly impacting their business.

It is not only important for workers to earn a fair share so they can support themselves and their families, but also critical to ensure that our economy rebuilds to be stronger and more resilient. Prior to the current public health crisis and resulting recession, earnings inequality had been growing since at least the 1980s while the labor share of national income has been declining in same period. This is cause for concern as recent evidence suggests that the labor share of income has a positive impact on GDP growth in the long-run.

The unprecedented economic shock caused by the coronavirus pandemic revealed how economic inequality leads to a fragile economy, where those with the least are hit the hardest, amplifying recessions since lower-income workers typically spend more of their income in the economy. But the crisis also demonstrated how economic policy targeted toward workers and families can provide a foundation for growth. This is because workers are the economy, and pushing back against the concentration corporate power by providing resources to workers is the foundation for strong, stable and broadly shared growth.

The Causes of Monopsony

The concept of monopsony was initially developed by the early 20th century economist Joan Robinson, who examined how lack of competition led to unfair and inefficient economic outcomes. The prototypical example of monopsony is a company town, where there is one very dominant employer and workers have no choice but to accept low wages since they have no outside options. This is the most extreme case, but it is important to note that firms have monopsony power in any circumstance where workers aren't moving between jobs seamlessly in search of the highest wages they can get.

Firms can use monopsony power to lower workers' wages any time workers:

• Have few potential employers
• Face job mobility constraints
• Can only gather imperfect information about employers and jobs  
• Have divergent preferences for job attributes
• Lack the ability to bargain over those offers

I will go through each of these factors in turn and demonstrate how labor markets are unique compared to other markets in dealing with competitive forces.

While concentrated labor markets are not the norm, they are pervasive across the United States, especially within certain sectors or locations. When markets are very concentrated, employers can give workers smaller yearly raises or make working conditions worse, knowing that their workers have nowhere to go to find a better job with better pay. (See Figure 1.)

Figure 1

A study published in the journal Labour Economics by economists Jose Azar, Ioana Marinescu, and Marshall Steinbaum finds that 60 percent of U.S. local labor markets are highly concentrated as defined by U.S. antitrust authorities' 2010 horizontal merger guidelines. This accounts for 20 percent of employment in the United States. Research by economists Gregor Schubert, Anna Stansbury, and Bledi Tsaka goes further by estimating workers' outside options, or the likelihood a worker is able to change into a different occupation or industry. This study finds that even with a more expansive definition of job opportunities more than 10 percent of the U.S. workforce is in local labor markets where pay is being suppressed by employer concentration by at least 2 percent, and a significant proportion of these workers facing few outside options are facing pay suppression of 5 percent or more. As study co-author Anna Stansbury noted, "for a typical full-time workers making $50,000 a year, a 2 percent pay reduction is equivalent to losing $1,000 per year and a 5 percent pay reduction is equivalent to losing $2,500 per year."

Certain sectors are now very concentrated, such as the healthcare industry. In a paper by the economists Elena Prager and Matt Schmitt, they find that hospital mergers led to negative wage growth among skilled workers such as nurses or pharmacy workers. Consolidation and outsized employer power, alongside other phenomenon such as the fissuring of the workplace, may have broader impacts on the structure of the U.S. labor market when it affects the overall structure of the labor market, including the hollowing out of middle class jobs that have historically been a pathway for upward mobility.

Research by sociologist Rachel Dwyer finds that job polarization in care work sectors such as healthcare, which is heavily concentrated, is a primary cause of overall job polarization in the United States, where there are fewer middle-income jobs and growing employment at the low end and the high end of the labor market. Downward pressure on wages in high-growth industries such as healthcare can impact employment opportunities for all Americans.

But as I noted, concentration is not the only source of monopsony power. Job mobility—the ability to easily move between jobs—also affects labor markets and, in turn, may give employers power to set wages below competitive levels. Job mobility can be limited by anticompetitive conduct, where employers intentionally limit the ability of their employees to find other jobs or employers collude with each other to set pay standards—even when there are technically many employers in a local labor market. Noncompete agreements, where workers sign away their right to go work for a direct competitor of their employer, have become pervasive, including among low-wage workers where there is arguably no justification to limit worker mobility due to the necessity to protect trade secrets.

Research by economists Evan Starr and Michael Lipsitz found that after the Oregon state ban on noncompete agreements in 2008 job mobility increased by 12 percent to 18 percent and wages grew 4.5 percent more in occupations with high noncompete usage compared to those with low noncompete usage. The Executive Order by the Biden Administration released on Friday, July 9, explicitly asked the Federal Trade Commission to ban or limit these agreements.

But other factors influence mobility between jobs, including transportation networks and personal constraints on commute time. The greater importance of a shorter commute time for women workers contributes to the gender wage gap since it limits women's job searches. Employer-provided healthcare discourages changing jobs, or what economists' call "job lock." Research by economists Adriana Kugler and Ammar Farooq found that more generous Medicaid eligibility reduced job lock and increased the likelihood that workers changed jobs into higher paying occupations. A variety of real-life factors affect how workers switch jobs, which in turn can affect how much power employers will have over setting wages.

Asymmetric information between employers and workers also influences how workers sort between jobs and puts downward pressure on wage offers. Workers often know little about the salary range at potential employers or even within their own firms. A "salary taboo" discourages workers from asking their colleagues their salary or disclosing their own. In contrast, employers know what all their employees are paid and often require applicants to disclose their current salaries or competing job offers, giving them much more information to work with.

In scenarios where a new salary transparency regime was instituted, such as one study of public-sector workers in California, workers were more likely to quit their jobs once they knew the pay scales within their workplaces, which, in effect, is a competitive market response to greater information. Likewise, employers may have imperfect information about the ability of job applicants, so wage offers to new employers may not be connected to workers' abilities.

And finally, heterogeneous worker preferences, where individual preferences for attributes of jobs are unique and varied, also gives employers the power to undercut wages. Workers are not  fully compensated for the tradeoff between their preferences and the job offers employers make. Workers who are more likely to face hostile work environments, among them Black workers in primarily White occupations or women in male-dominated fields, may prefer workplaces that are more inclusive. Or parents who have primary responsibility for caretaking for their children may need more a predictable schedule or autonomy over their schedules. But research on so-called compensating wage differentials finds that workers are not fully compensated for these imperfect tradeoffs the make in their job choices.

How Monopsony Exacerbates Economic Disparities

The concentration of corporate power has dire consequences for workers who are already disadvantaged in the U.S. economy. Regional economic divergence between urban and rural areas is exacerbated when there are few job options for workers in less-populated parts of the country. Workers facing hiring discrimination will have fewer job offers, so they'll be forced to accept substandard opportunities. Outside life circumstances, such as being the primary caretaker for children in a family as women are more likely to be, may limit the scope of a worker's job search. And having an unstable fallback position, without personal wealth or adequate income supports, may reduce the ability of a worker to search for a job that is both the best fit and garners the highest possible wages. Employers are able to exploit these conditions by undercutting workers' wages without risking losing their labor supply, amplifying the negative consequences of rising corporate power.  

The rise of monopsony across the United States has heightened economic challenges in particular in rural areas, depressing wages below what they would otherwise be. Labor markets in rural areas are much more likely to be concentrated, which may partially explain why urban labor markets have higher wages where competition for workers is higher. As researcher Zoe Willingham and economist Olugbenga Ajilore have written, this has amounted to the reemergence of the modern company town in many rural areas. One case in point: Research by economist Justin Wiltshire finds that Walmart Supercenters push down both earnings and employment across the counties where they were opened compared to counties where a Walmart Supercenter was proposed but blocked locally. Walmart is able to do this because in those counties it is the dominant employer of retail workers, giving it the power to set wage rates, compared to areas where there were many different retailers competing for workers.

My own research with economist Mark Stelzner examines how external conditions of structural racism and sexism give individual employers the ability to exploit workers along the lines of race, ethnicity, and gender. One such way is that the vast wealth divide between Black, Latinx, and White Americans makes it harder for Black and Latinx workers to search for jobs when taking time out of the labor force exposes them to a much greater financial risk. If Black and Latinx workers don't have the financial cushion to maintain job search periods without income or adequate income support such as Unemployment Insurance, then they are less likely to quit jobs that offer low wages or poor working conditions.

Women workers also face unique barriers, such as hostile working conditions including sexual harassment. Insufficient legal protections or workplace recourse can leave women neither able to combat the harassment nor leave their jobs without wealth to manage the search for a job with better conditions. The result is employers facing little risk of their workers quitting, giving them the power to undercut wages. And women workers face additional constraints to job mobility imposed by a disproportionate care burden within families. If a woman is the primary caretaker for children or other family members with care needs, then this will reduce the geographic scope of her job search and may limit acceptable job schedules. This results in women being less likely to move around for jobs within their occupation in search of the best pay they can receive.

The aggregate result of these individual family constraints are employers' ability to offer women lower wages. Research on teachers has found that women teachers are over-represented in lower paying school districts, which may be partially explained by women's lower ability to search around for the highest paying position. On top of this, within school districts pay differences between women and men are also significant, which demonstrates how lower bargaining power for women persists despite rigid pay structures.

Mainstream economic orthodoxy has argued that wages are set by competitive forces, so proactive policies to raise wages and increase worker power would limit the potential for economic growth that comes from competition. Yet the broad research indicates that the U.S. labor market is anything but competitive, including evidence that monopsonistic labor markets give employers the power to suppress wages by more than one-third. In fact, one insight from the monopsony framework developed by Joan Robinson in the early 20th century is that raising wages and increasing worker power actually encourages the outcomes that would exist in a competitive labor market, with greater earnings alongside higher employment levels.

How to Push Back on Corporate Power Through a Robust, Pro-Competition Policy Agenda

Reversing the trends that caused this "Second Gilded Age" starts with ensuring that the U.S. economy is competitive. Robust antitrust enforcement of existing laws against concentration and anticompetitive conduct is the first step toward ensuring that economic progress is shared between workers and employers. The Biden Administration is also starting to strengthen enforcement against anticompetitive conduct, including excessive use of non-compete agreements. But this can go further, including new laws that would codify, clarify, and strengthen antitrust law for labor markets. Without significant legal precedent for antitrust protections in labor markets, enforcers have little recourse to protect workers, but legislation can pave the way.

But antitrust actions alone are not sufficient when the sources of monopsony power also come from inherent, unique features of the U.S. labor market compared to other markets such as commodities. For this reason, another important way to address the concentration of corporate power is to build countervailing power for workers. In practice, proposed policies—such as the Protecting the Right to Organize Act that would expand the ability of unions to organize workers alongside institutions, including a more effective National Labor Relations Board, which upholds current U.S. labor organizing laws, with modern enforcement capabilities—would limit employers' ability to exploit workers along multiple axes. The need for more pro-labor policies is increasingly evident as employers' monopsony power mounts, given the inverse relationship between decreasing worker power as measured by union density and rising income inequality,  partially due to an anti-labor policy and institutional environment since the 1970s, and as racial and gender wage disparities remain persistent and are likely to worsen due to differences in unemployment amid the coronavirus pandemic.

One feature of a monopsonistic labor market is that wages are artificially suppressed, so there is room to raise the floor with tools such as increasing the minimum wage and exploring the possibility of wage boards. Minimum wages have been shown to be a critical tool for reducing the wage divide between Black and White workers, and the falling real value of the minimum wage has exacerbated pay disparities. Increasing the statutory minimum wage would limit the ability of employers to exploit the conditions of structural racism. Going beyond this could include wage boards, which would raise wages within occupations or industries, such as has been done in Arizona, Colorado, California, New Jersey, and New York. In a monopsonistic labor market, raising wages with these tools replicates the labor market outcomes that would exist in a hypothetical perfectly competitive market.

Finally, giving workers universal protections and the social infrastructure policies discussed in my testimony would provide a stable foundation for workers to search for quality jobs where they can be as productive as possible and earn the value they contribute to the economy and society. This includes effective anti-discrimination enforcement and workplace safety standards to ensure workers receive job offers and equitable pay and are not stuck working in hostile environments. This includes family economic security policies that help families manage care needs and engage in the labor market, such as paid family and medical leave, paid sick time, accessible and affordable childcare, and scheduling stability, giving workers more space to find the best fit for their employment. And this includes income supports that give workers an outside option so they can find better jobs. Unemployment insurance expansions and Medicaid expansions have both been shown to increase the likelihood that workers will match into higher paying jobs. Building the foundation of security for workers not only directly impacts their wellbeing but also provides the foundation for productivity growth through better job matches and stronger economic growth through increased incomes. Boosting workers' economic security is an effective tool for pushing back against the tide of concentrating corporate power.

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Where is Behavioral Economics Now? [feedly]

I believe Marxists should pay more attention to Behavioral Economics than they have, at least far as I am aware. Since Danial Kahnneman's Nobel prize, his experimental results and the insights that followed have indeed, as Tim Taylor concludes, below: 

"one of the advantages of behavioral economics is that it helps to drag social science generalities down into the realness of the particular." 

In the history of economics Marx (and the other 'Classical Economists') were definitely "supply-siders" in analysis. The "demand" side of economics is reflected primarily in prices, and "price theory". "Demand side" economics became prominent as DATA about Demand began to accumulate and access was made available to researchers. As the scale of data accumulation advanced, powerful analytical and statistical tools have been developed, and still being perfected with computation,  to  understand variations in both prices, and price expectations.

Marx focused on the essential characteristics of a commodity that explained it's production, and the economic transactions between owners and wage-labor.. What is the worker really selling? What is the employer really buying? Some have taken Marx to task for paying scant attention to demand. However, in truth, there would not have been much to study in 1870 -- so, focusing on demand would have been speculative in the extreme. For Marx prices would fluctuate with supply and demand, and speculation, but would be -- constantly and forever --  converging toward the costs of production plus the average rate of profit. That formulation is a bit Hegelian -- "Value" appears like an Ideal Becoming Real. But c'mon -- there was little good data. Analytical tools, vocabularies, languages, etc were all that was available in the social sciences.

Behavioral Economics changes that

Where is Behavioral Economics Now?

Tim Taylor
https://conversableeconomist.wpcomstaging.com/2021/07/20/where-is-behavioral-economics-now/

Behavioral economics is the combination of insights from psychology with economic behavior. A usual starting point for models of economic actors is that while they will sometimes make wrong decisions, they will not make the same wrong decisions over and over. To put it another way, they will continually be trying to avoid what they now perceive as the errors of the past, while also committing a range of mistakes.

But psychological research suggests that in certain settings, many people will make the same mistake over and over. For example, many people have personal or economic habits (say, exercise, or eating healthier, or quitting smoking, or saving more) that they would like to change. They know with some part of their mind that if they don't make a change, they are likely to regret it in the future. Nonetheless, they keep deciding they will start the desired change tomorrow, rather than today. There are many of these biases that, while one can learn to overcome them, seem built into cognition. People often do a poor job of thinking about risks that have a low probability of happening. Behavioral economics looks at the outcome of economic situations where some or many people have these biases.

For those who want to learn what behavioral economics is all about, a good starting point is The Behavioral Economics Guide 2021, edited by Alain Samson. It's from the behavioraleconomics.com website, which serves as an online hub for people interested in the topic. I recommend the volume for at several purposes.

There's a 30+ page glossary of behavioral science concepts, for those who would like a little help with the lingo, starting with "action bias" and ending with the "zero price effect." Here's "action bias:"

Some core ideas in behavioral economics focus on people's propensity to do nothing, as evident in default bias and status quo bias. Inaction may be due to a number of factors, including inertia or anticipated regret. However, sometimes people have an impulse to act in order to gain a sense of control over a situation and eliminate a problem. This has been termed the action bias (Patt & Zeckhauser, 2000). For example, a person may opt for a medica treatment rather than a no-treatment alternative, even though clinical trials have not supported the treatment's effectiveness. Action bias is particularly likely to occur if we do something for others or others expect us to act (see social norm), as illustrated by the tendency for soccer goal keepers to jump to left or right on penalty kicks, even though statistically they would be better off if they just stayed in the middle of the goal (Bar-Eli et al., 2007). Action bias may also be more likely among overconfident individuals or if a person has experienced prior negative outcomes (Zeelenberg et al., 2002), where subsequent inaction would be a failure to do something to improve the situation.

Here's the definition of "zero price effect:"

The zero price effect suggests that traditional cost-benefits models cannot account for the psychological effect of getting something for free. A linear model assumes that changes in cost are the same at all price levels and benefits stay the same. As a result, a decrease in price will make a good equally more or less attractive at all price points. The zero price model, on the other hand, suggests that there will be an increase in a good's intrinsic value when the price is reduced to zero (Shampanier et al., 2007). Free goods have extra pulling power, as a reduction in price from $1 to zero is more powerful than a reduction from $2 to $1. This is particularly true for hedonic products—things that give us pleasure or enjoyment (e.g. Hossain & Saini, 2015). A core psychological explanation for the zero price effect has been the affect heuristic, whereby options that have no downside (no cost) trigger a more positive affective response.

If you have a drop of social scientist blood in your veins, descriptions like this will start your pulse pounding. Do these effects really exist? In what context? How would you measure them? Are these effects intertwined with a different or perhaps broader effect? If you need concrete examples, the bulk of the report is 15 short and readable summaries of recent studies in the area, with examples concerning prevention of gender-based violence, banking and insurance, sustainable agriculture, career coaching, and more.

One theme that emerges from several papers in the volume is that behavioral economics effects are often deeply rooted in a particular context: that is, you can't just grab an item from the glossary, plug it into your life or business or organization, and assume you know how it will work. For example, Florian Bauer and Manuel Wätjen write about their research in "Tired of Behavioral Economics? How to Prevent
the Hype Around Behavioral Economics From Turning Into Disillusionment." They write:

Applying the behavioral economics effects found in academic experiments to marketing is becoming more and more popular. However, there is increasing evidence that copy-and-pasting academic effects does not achieve the desired effects in real life. This article aims to show that this is not because customers are becoming wise to nudges or that behavioral economics does not work at all, but because the application of behavioral economics typically ignores the contextual aspects of the actual decision to be influenced. Herein, we present a framework that considers these aspects and helps develop more effective behavioral interventions in marketing, pricing, and sales.

John A. List makes an argument that is similar in tone but broader in his introduction to the volume, "The The Voltage Effect in Behavioral Economics." Listpoints out that it is fairly common for someone to latch on to an academic study in behavior economics, but then are disappointed when it doesn't seem to "scale up" to a real-world context. List writes:

Indeed, most of us think that scalable ideas have some 'silver bullet' feature, i.e., some quality that bestows a 'can't miss' appeal. That kind of thinking is fundamentally wrong. There is no single quality that distinguishes ideas that have the potential to succeed at scale with those that do not do so. In this manner, moving from an initial research study to one that will have an attractive benefit cost profile at scale is much more complex than most imagine. And, in most cases, scaling produces a voltage drop—the original BE [behavioral economics] insights lose considerable voltage when scaled. The problem, ex ante, is determining whether (and why) that voltage drop will occur. … What this lesson inherently means is that scaling, in the end, is a weakest link problem: the endeavor is only as strong as the weakest link in the chain.

In other words, the connection from an academic study to a real-world application involves a number of links in a chain. List lays out five of them:

1. Infererence. Perhaps the academic study you looked at was a "false positive"–that is, the result won't hold up in other similar studies. List suggests that before believing an effect is real, one should look for "three or four well-powered independent replications of the original finding."
2. Representativeness of the population. If a study was done on a group of college sophomores, or retirees, or people with a certain medical condition, you can't necessarily assume that it apply well on other groups, like working-age adults or high school dropouts.
3. Representativeness of the situation. For example, a small-scale program with a small group of dedicated and trained participants may not scale up well to a larger general population group that is less dedicated and less well-trained.
4. Spillovers and general equilibrium effects of scaling. Say that I start a program in a certain area to teach a highly desirable skill to some workers. Those workers get much higher pay as a result. So then I expand the program very substantially to teach this skill to many more workers. The original group did well in part because it was a small group, and the skill was still scarce. But at some point, as the skill becomes common in that are, the rewards will be lower.
5. Marginal cost considerations. As program expands, there are two possibilities. One is that there are economies of scale: that is, as the program covers more people, average cost per person falls. For example, a web-based program that can be expanded to cover many more people might have this property. However, the other possibility is that as the program covers more people, average cost per person rises. This can happen if the program needs some specific and particular skills that may be hard to get: for example, perhaps I can train a small group of teachers who volunteer to be part of my new specific curriculum, but as I try to train bigger and bigger groups, it gets harder.

List draws on Tolstoy to summarizes his thinking. At the beginning of Anna Karenina, Tolstoy famously wrote: "All happy families are alike; each unhappy family is unhappy in its own way." List echoes: "[A]ll successfully scaled ideas are alike; all unsuccessfully scaled ideas fail in their own way." I would just add that from this perspective, one of the advantages of behavioral economics is that it helps to drag social science generalities down into the realness of the particular.

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Civil monetary penalties for labor violations are woefully insufficient to protect workers [feedly]

Civil monetary penalties for labor violations are woefully insufficient to protect workers
https://www.epi.org/blog/civil-monetary-penalties-for-labor-violations-are-woefully-insufficient-to-protect-workers/

Key takeaways:

• Workers' rights and safety violations receive significantly lower fines than financial and corporate law violations. And in many cases, these violations involve no monetary penalty at all.
• Because workers' rights and safety violations result in such low financial penalties, these fines function as the cost of doing business rather than as deterrents.
• The ineffective nature of workers' rights enforcement often leads to repeated workers' rights and safety violations with little incentive for employers to improve conditions.

Civil monetary penalties—fines imposed when a law or regulation is violated—are enforcement tools. Agencies utilize them to enforce statutes and regulations, and the minimum and maximum civil penalties may be established administratively or by statute. By examining civil monetary penalties for violations of various key federal laws, we find a striking pattern: Workers' rights and safety violations are assigned a significantly lower penalty value than violations of other laws—characteristic of a system that unjustly undervalues workers. While employers and corporate officials face significant civil monetary penalties for breaking the law related to consumer finance, lobbying, and insider trading regulations, violations of fundamental labor and worker protection laws involve only minimal civil monetary penalties or even no monetary penalty at all.

The Department of Labor (DOL) enforces key worker protection statutes using civil monetary penalties. The maximum penalties range from $1,084 for recordkeeping and administrative violations to $136,532 for repeated safety violations. For example, DOL enforces the Occupational Safety and Health Act (OSHA), which protects workers from hazardous workplace environments. All non-willful OSHA violations, including violations which would likely lead to the death of an employee, have a maximum fine of just $13,653. Even a willful violation of OSHA, often issued for repeatedly leaving workers in physical danger, has a maximum penalty of $136,532.

A willful child labor violation under the Fair Labor Standards Act (FLSA), including a violation which leads to the death of a minor, incurs a civil monetary penalty of up to $120,230. All other standard child labor violations have a maximum penalty of $13,227. A repeated minimum wage or overtime violation is associated with a penalty of just $2,074.

While the civil monetary penalties included in worker protections statutes enforced by DOL are low, there are no civil monetary penalties for violating our fundamental labor law, the National Labor Relations Act (NLRA). The NLRA is enforced by the National Labor Relations Board (NLRB) and protects the right of workers to form unions and collectively bargain without retaliation from an employer. However, while the NLRB may in some cases recover back pay for employees who were illegally terminated, such as during a strike, they are unable to assess any civil monetary penalties.

Corporate and financial crimes involve significantly higher civil monetary penalties. These statutes are enforced by a variety of agencies, including the Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC). The SEC enforces regulations surrounding insider trading with a large civil monetary penalty of up to $2.16 million. Similarly, a penalty imposed by the FTC for market manipulation or providing false information to a federal agency contains a maximum fine of $1.2 million. Comparable penalties for financial crimes, such as violations of the Consumer Financial Protection Act, also stretch well into the millions of dollars.

In nearly every case, the civil monetary penalties for financial crimes significantly exceed the fines for violations of worker protection statutes. The maximum penalty for a willful OSHA violation is just 6.3% of the maximum penalty for insider trading, while a maximum penalty for a standard OSHA violation is well below 1% of the maximum insider trading penalty. Similarly, a minimum wage or overtime violation under the FLSA is less than 0.1% of the insider trading penalty. Even a willful child labor violation makes up only 5.6% of this insider trading fine.

The penalties for violating workers' rights and safety laws are simply not high enough to demand compliance. In fact, a study from the Peterson Institute for International Economics finds that these FLSA fines are minuscule when "compared to the profits that can be earned through noncompliance." While we've referenced the maximum fines for labor violations above, this study maintains that only a "minority of investigations" under FLSA resulted in additional fines outside of worker back pay. The study finds that "only 11% of detected FLSA violations are considered repeat and/or willful, nearly half of these are not required to pay any civil monetary penalty, and, even when levied, typical penalties are relatively small (with only 13% of repeat and/or willful violators required to pay a penalty of more than $1 per dollar of back wages owed)."

Not only can the fine be too low to ensure compliance, but in the majority of cases, DOL doesn't impose a fine at all. The study concludes that a business would need to believe they have between a 78 and 88% chance of being found to be violating FLSA for it to be worth complying with the law. In reality, this chance is significantly lower given the deeply inadequate resources devoted to wage and hour investigations. This study suggests that the true chance of investigation "may be as low as 2%."

The ineffective nature of workers' rights enforcement often leads to repeated violations with little incentive for employers to improve conditions. For example, in the case of Hagel Metal Fabrication, OSHA issued a willful penalty for leaving employees exposed to laser cutting machines, which could have struck and crushed them, despite the obvious risks. Indeed, a 23-year-old worker was fatally crushed by such a machine, prompting the investigation that led to the penalty. However, after three willful violations and six serious citations, OSHA's fines for the company totaled only $317,000. Later, the fine was reduced to $200,000 in total, an average of only $22,222 per violation.

Further, OSHA itself notes that the violating employer had been issued 23 previous citations, including "willful and serious citations for exposing workers to dangerous conditions." Although the company incurred many previous OSHA violations, they continued to violate regulations without extensive fines to deter future violations, leading to these recent penalties and the company being placed on OSHA's Severe Violator Enforcement Program. The company abruptly closed in 2015.

As it stands, civil monetary penalties for financial crimes are significant and stretch into millions of dollars, while in many cases, employers who violate labor laws often still profit after small OSHA or FLSA fines. At the end of the day, these penalties for egregious, often inhumane labor violations aren't true deterrents—they simply represent the cost of doing business for these employers.

Table 1

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Care workers are deeply undervalued and underpaid: Estimating fair and equitable wages in the care sectors [feedly]

Care workers are deeply undervalued and underpaid: Estimating fair and equitable wages in the care sectors
https://www.epi.org/blog/care-workers-are-deeply-undervalued-and-underpaid-estimating-fair-and-equitable-wages-in-the-care-sectors/

The Biden administration has made large investments in care work—both child care and elder care—key planks in its American Jobs Plan (AJP) and American Families Plan (AFP). These investments would be transformative, and a greater public role in providing this care work can make the U.S. economy fairer and more efficient. The administration has also recognized the need to pay workers in these sectors higher wages—which are sorely needed—but setting a fair wage standard for care workers presents unique challenges.

For a variety of systemic reasons, including racism, misogyny, and xenophobia, there has never been a set of institutions that has managed to carve out decent wages and working conditions in care work. For example, the average hourly wages for home health care and child care workers are $13.81 and $13.51, respectively, which is roughly half the average hourly wage for the workforce as a whole. So, unlike sectors like construction, a "prevailing wage" standard would just cement the industry-wide insufficient wages currently experienced in care work.

But just because it's challenging doesn't mean it's impossible to establish strong wage standards in this sector. All wages in the U.S. economy are politically and socially determined, but given that care work is heavily publicly financed, care wages are especially determined by political decisions (via commission or omission). As a result, there is a strong administrative responsibility and opportunity to set equitable wages in this sector. This research memo outlines a number of ways to improve the wage standard for care workers and is a preview to a forthcoming, more comprehensive research report.

Care work enables people to survive and thrive across generations, and it cannot be accomplished without workers. Yet our value systems and social relations acutely undervalue care work and discredit its importance to our lives. These phenomena are deeply rooted in misogyny, xenophobia, and in the U.S. context, anti-Blackness. We cannot recognize and remedy the precarious and immiserating wages of most care work without acknowledging and rectifying the roles these identities have played in shaping the conditions and workforce of care provision.

Care workers are overwhelmingly women and disproportionately Black, Hispanic, and immigrants, groups which have traditionally faced discrimination in labor markets and in the political process. As shown in Figure A, both the home health care and child care sectors are overwhelmingly women, and Black and Hispanic women are largely overrepresented relative to their share in the overall workforce. In addition to facing racism and sexism in the labor market, care workers—particularly home health care workers—are disproportionately more likely to be foreign born (either naturalized or not), which gives them even less power to negotiate for higher wages or better working conditions. This necessitates a look at not only how we undervalue care itself, but also who care workers are and the historical and social discriminations they have faced and still face today.

Figure A

Care work being predominantly borne by women of color, and specifically Black women, dates back to slavery. The racial and gender-motivated maltreatment of these workers translated into a lack of protection and abysmal pay in commodified versions of these roles post-slavery, including in the exclusion of domestic workers in most New Deal reforms. Working conditions and pay for such work reflect the societal views of care jobs and workers, including the extent of scrutiny on whether they are "skilled" jobs. There is a close link between care workers and care recipients, including people who are both. Ableist narratives and policies devalue and dehumanize people needing care and are inextricably linked to the racialized systems of oppression that devalue care workers' labor. Consequently, the fight for better working conditions and pay for care workers is inseparable from also centering and improving conditions for care recipients.

Our forthcoming study aims to provide policymakers a broad economic framework for thinking about how to pay care workers, including both home health care and child care workers, who are extremely undervalued and underpaid in the United States and across the world.

Using the research literature and microdata, we provide several considerations for setting pay standards for both home health care and child care workers: a minimum standard for all workers; an estimated strong wage standard that reduces wage penalties currently faced for performing care work and reduces penalties associated with racial and gender discrimination; an additional estimated union wage premium for care workers; and a look at other countries or professions for reasonable benchmarks (summarized in Table 1). We conclude with a discussion of how these pay penalty calculations can serve to set equitable and sustainable wage standards and combat wage suppression.

Table 1

Key benchmarks for fairer wages:

• A minimum standard for all workers: The minimum starting place for all workers in today's labor market should be no less than $15 an hour, but a full-time, full-year worker making $15 an hour cannot support a family at a decent standard of living anywhere in this country. Given the vital and demanding nature of care jobs and the increasing need for care workers because of demographic trends, care workers should be paid more. They should have the protection and dignity needed to be desirable careers. If we require a care worker to rely solely on their income to make ends meet, then we can assert that any care worker in the United States should at least earn a wage that would allow them to care for a young child on just their own wages in the least expensive metro area. This still-too-modest living wage standard would require full-time hourly wages of at least $21.11.

• Reduction of care and discrimination pay penalties: We adjust current pay for care workers by removing the estimated care pay penalty. Then, we adjust pay using a measure of pay gaps in the labor market at large, which account for lower outside options for historically disadvantaged demographic groups. We calculate a more appropriate wage of $20.20 and $19.87, for home health care and child care workers, respectively.

• Adding the union premium for a stronger wage standard: With additional bargaining power from unionization, reasonable wages for home health care and child care workers should be $22.26 and $21.90, respectively. In addition to boosting wages, unions help reduce gender and racial disparities and unionized workers are more likely to have better benefits such as paid leave and health care.

• International comparisons for home health care workers: Although the undervaluation of care work is a global phenomenon, the situation for U.S. workers is particularly dismal when compared with peer countries. Across the current 27 E.U. member states, non-residential long-term care workers are paid 80% of the average national hourly wage, and among the better performers, they are paid 95% of average wages. Extrapolating to the U.S. context, home health care workers should be paid in the range of $21.85 to $25.95.

• Comparisons with other teachers: Given similar skill sets and experience, child care workers are early educators and should be paid as much as similarly educated teachers of elementary and middle school students. Of course, school teachers face substantial wage penalties vis-à-vis other similarly credentialed workers in the economy. Taking these into account, we estimate a reasonable wage for child care workers in the range of $21.22 to $25.30.

Setting an equitable wage in the care sector—which our wage estimates and discussion above hope to help guide—is a first step in transforming a truly undervalued and undercompensated industry. It is important to note that given wage suppression factors and centuries of entrenched racial and gender discrimination, no single practice is perfect. None are likely to completely eliminate the structural disparities inherent in the care sector. However, reform and significantly higher wages are possible, necessary, and long overdue. Care workers improve countless lives, very often in poor working conditions and for low pay. At the same time, they face a myriad of penalties and have limited other options due to historical and current labor market discrimination. The economic exclusions endured for being a member of subordinated groups across gender, race, and migration status reinforce each other and are reflected in the observed outcomes and demographic breakdowns we see in these industries. These multiple penalties must be considered when determining just how much care workers should be paid. Active policies, such as strong legislative or regulatory wage standards, must be implemented to begin to eliminate these penalties.

Our economic system, left to its own, has failed to recognize the worth of care work and maintain a well-functioning market. Securing living wages, dignity of work, and safe working conditions for care workers is necessary for our collective survival. Better pay and work standards unambiguously improve the lives of workers themselves. Further, they make the care provision better, secure a stable workforce, reduce turnover, and are good for the macroeconomy. These are all necessary amid demographic shifts that will increase the need for care work in coming years. Care work is valuable, demanding, and requires specialized skills, where workers are routinely making highly consequential decisions about and with care recipients. Addressing the wage suppression of care workers is unmistakably an intersectional gender, racial justice, disability, and immigrant rights issue. By making deliberate policy choices rectifying historical and current harms and grounding them in the experiences of the most marginalized of these workers, we are ensuring a shared prosperity for all.

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