5 ms·

American companies are suppressing wages for many workers

56 points by Caveman_Coder 9y ago

mlillie 9y ago
Not sure how declining union membership is laid out, and then strengthening union membership is not suggested.
throwaway_54321 9y ago
I didn’t make a throwawy just for this — just happened to be logged in from last time I used it. Whatever points the article is making I’m sure are all wonderful, but I didn’t read it. I just read the headline and my immediate reaction was simply: No shit. Who are the people that need to be told this?
- randyrand 9y ago
  Why should this be obvious? Most people would assume the cost of labor is set no different than the cost of a bag of concrete or a gallon of milk - supply and demand.
  - knuththetruth 9y ago
    I guess it depends on your definition of “most people.” I grew up poor and around poor people. No one thought wages were determined by supply and demand. It was always about what the boss could get away with.
    - skookumchuck 9y ago
      And employees negotiate for as much as they can get away with. Supply & demand.
      - chowells 9y ago
        Most employees get fired for trying that. Glibly saying "supply & demand" doesn't erase the massive power imbalance between employer and employee in most businesses.
        skookumchuck 9y ago
        > Most employees get fired for trying that. If one goes about it like an @ss, and without doing one's homework, sure. The way to do it is to deliver value that is worth more money, and then approach management with a proven track record of you being worth more money. It worked for me.
        chowells 9y ago
        A very large percentage of employers don't have employees worth money. They have employees as cost centers, totally devoid of worth as humans or even resources. I know a lot of people who work for these companies. They have jobs like data entry or cashiers for massive corporations that have bought out all their local competition in their particular market. Their evaluation scale is purely "how often do they screw up?". I used to date a woman who had (for a short time) a data entry job. They were expected to make no more than 3 mistakes per month. There was no reward for fewer mistakes. Any more and your job was in jeopardy. Employees in these situations have the power to negotiate exactly when the loss of the job is not a significant threat to their life. Most employees with these jobs have them because they needed some job, any job, to keep their life together. The employers know this. Anyone who rocks the boat isn't an employee desperate enough to accept the abuse, so they aren't wanted there anymore. This is exactly the point the article was making. A non-negligible portion of the population has no alternative that's better than accepting this abuse.
        skookumchuck 9y ago
        Millions of people come to this country, legally and illegally. They come with nothing, often not even speaking English. But they seem to find decent jobs, move around the country to find those jobs, and are able to start businesses. I find this difficult to reconcile with your claim that people are forced to work for certain employers.
    - nopriorarrests 9y ago
      And the boss could get away with ignoring the law of supply and demand? How so?
      - IntronExon 9y ago
        Look to AAA game companies for a host of answers to that question. Treat your employees like burn&churn part timers, focus on assembly line kinds of output, hire them young, fire them young, etc.
        nopriorarrests 9y ago
        So, abundance of supply, because young people want to make AAA games?
        IntronExon 9y ago
        That, and because most roles in most projects don’t require stellar talent, just the ability to shut up and code. If you’re willing and able to monetize a sub-par product, as so much of software from games to IoT seems to be, then it works. It’s all part of the race to the bottom we’re getting to live through.
  - throwaway_54321 9y ago
    In my experience, “most people” simply aren’t that stupid. The assumption seems to be that greed and corruption are a default condition, and that there’s nothing we can do about it. I truly believe the average person —- who simply isn’t represented on HN —- is just resigned to this as a fact of life.
    - randyrand 9y ago
      There are a lot of positive externalities from greed: https://www.youtube.com/watch?v=F0VHiONkot8 https://www.youtube.com/watch?v=F0VHiONkot8
- randyrand 9y ago
  oops I commented on the wrong thread. original comment moved to here: https://news.ycombinator.com/edit?id=16488919 https://news.ycombinator.com/edit?id=16488919 (HN wouldnt let me delete this one)
  - skookumchuck 9y ago
    The non-competes also look like they're unenforceable, even where they're legal.
whb07 9y ago
Before the cacophony of “we need better laws! More government!” Please reflect that all the wage suppression that is commented on the article comes from laws in the first place. It’s amazing to me that the solution presented by those who are anti laissez faire are more laws to correct the past laws. Market transactions only happen if they are mutually beneficial. Can’t force any side as this will distort it. Please look at the supreme labor laws found in Europe to find out what happens. To note, the Spanish, French, Italians face chronic young adult unemployment with roughly 1/4 people being employed.
- Caveman_Coder 9y ago
  > "Market transactions only happen if they are mutually beneficial. Can’t force any side as this will distort it." I think the modern assumption is that things are distorted, and they are heavily distorted in favor of business...
- Analemma_ 9y ago
  Nice strawman. Nobody says that, nobody is going to say that. The most commonly proposed solution to this problem is unions, but I bet that’s the one thing you hate more than laws so you won’t suggest it.
randyrand 9y ago
" In other words, in the labor market, effectively a small number of employers are competing for their labor" This is not what a monopsony is. That's an oligopsony. "Because most people sink roots in their communities, they are reluctant to quit their job and move to a job that is far away." The effect of this is a wash because this is also a problem for employers too. The supply of good workers is smaller because few people are willing to move towns for one - which drives labor prices up. "Unions used to offset employer monopsony power" Ahh, okay, now im understanding the point of this article. Lets fight monopolies with more monopolies instead of solving the underlying issues! I agree with the points about non-competes though.
- Caveman_Coder 9y ago
  > "Ahh, okay, now im understanding the point of this article. Lets fight monopolies with more monopolies instead of solving the underlying issues!" So you don't think unions have a place in modern day society?
  - randyrand 9y ago
    I think unions should be tried for anti-competitive practices, just as any monopoly should. What is the difference between a bunch of carpenters unionizing their wages versus a bunch of small and large companies all agreeing to price-fix their products? Nothing.
    - scribu 9y ago
      What are some of those “anti-competitive” practices that you disagree with?
    - mikeash 9y ago
      Unions are no more monopolies than any random company is, and union bargaining isn’t collusion any more than a hiring manager consulting with HR is. When employers band together to bargain collectively, we call it a “company” and it’s not only accepted, it’s so entrenched in our culture that we can barely conceive of any other way. When employees do the exact same thing, we attack them relentlessly.
pembrook 9y ago
Two words: pay bands. Corporate HR policies in the modern era are essentially designed to commodify and drive down the costs of labor through information assymetry, rigid pay bands, and lawsuit mitigation. Since most labor no longer organizes to negotiate for themselves, obviously the “Industry standard” pay bands are going to have a strong dampening effect on any wage increases even in the case of a worker shortage. Most individuals alone don’t have the power or the information edge needed to beat an “industry standard” which has essentially been decided through collusion of the largest players in the market. See the direct email correspondence of Steve Jobs and Eric Schmidt for more info.
- skookumchuck 9y ago
  I've gotten pay significantly above HR's "pay band" and "policy", because I refused to work for less. Workers have power, too. They can refuse the offer. If you're an employer and you want good people, you'll find out real quick about their power.
  - Daishiman 9y ago
    Yeah, lucky you being in a profession with an extremely high unmet demand. Not so good for the poor chumps working in retail who've been told that unions are bad.
    - skookumchuck 9y ago
      There's a wide variety in retail employees. They are not interchangeable. There's plenty of opportunity to show you're worth more.
- bassman9000 9y ago
  commodify Enter Scrum. One of the side effects: the more effective the process, the more replaceable and interchangeable the workers are. Granted, great for planning.
caseysoftware 9y ago
Hasn't the US labor participation rate been dropping for over a decade? If that is accurate, it makes sense that unemployment is down and still going down but wages aren't moving at all or as quickly. There's effectively "spare capacity" in the system in the form of people who were removed from the unemployment numbers but still wanted to work.
Xcelerate 9y ago
> Because most people sink roots in their communities, they are reluctant to quit their job and move to a job that is far away. How common is this? As a child, my father changed jobs every few years, and we moved often as a result of that (until I was 10 at least). We even lived in France for three years because my dad thought it would be a good opportunity to learn about other cultures. So personally, I've never had any objection to moving for the best opportunity. My wife on the other hand comes from a different background; she grew up in the same house in a rural town and thinks that moving hurts children's ability to develop friendships. She also believes that being close to family is more important than optimizing your career (although she has kindly agreed to move should a good opportunity arise). Is the "stay in one spot" viewpoint becoming more common? I can see how this would lead to competitive job offers stagnating in a region if no one is willing to move into it or away from it.
- zitterbewegung 9y ago
  It’s not becoming more common not all people have equal situations. Maybe you have parents that can’t take care of themselves. Maybe you can’t take of yourself. You could even like the weather or were you are born. Not everyone wants to live in New York or Silicon Valley. Not every person has rational actions or needs either .
- flukus 9y ago
  IME, it's very common, the default for most. Once you have kids and buy a house you've decided to stick to the same geographic area at least until the kids are adults. I'd guess it's even more common now that more children are living with single parents, one parent will be deprived of easy access to the kids if they were to relocate. It's the biggest reason people hate gentrification as well, they can quickly get priced out of an area they belong to.
snake_plissken 9y ago
I was surprised share buybacks were not mentioned. Seems like every company has been doing this over the past few years. I'm no finance guru: is there a reason buyback money couldn't be diverted into pay raises?
- nopriorarrests 9y ago
  Pay raises lower the stock price. Buybacks raise it. CEO compensation depends on stock price. That's all.
  - Pokepokalypse 9y ago
    . . . because stock is taxed differently than income. This is a huge incentive behind how our system has become so broken.
    - 1123581321 9y ago
      No, it's because a buyback is purchasing an asset (a share of issued stock) and payroll is just an expense. You could argue that increased payroll increases retention which is valuable, but that's an indirect and uncertain way to increase the value of a company.
wrong_variable 9y ago
What is frustrating is the problem can be attacked even without introducing any new law. In many industries the reason employers have monopsopy power is regulations that prevents new players from eating the fat profit margins of incumbent players. telecom, healthcare, real estate, legal services ...... Just like coders see every problem as a software problem - lawmakers tend to think any problem can be solved with more laws ! not realizing they are also playing the economic game theory charade. In this case particularly, introducing more laws is going to make is harder for new players from gaining market share. I am not also just making this up, France has some of the most progressive labor laws written with the best of intentions - but lawmakers failed to see the economical ramification of their laws. It made employers reluctant to hire full time workers - creating a painfully high unemployment rate. A lot of American multinationals also have most of their growth happening outside US borders, I think stronger Unions and ill thought out reform is going to result in more aggresive offshoring. I know supply side economic arguments has gone out of fashion - but by allowing entrepreneurs to more easily embrace globalization the same way as larger companies exploit it will more comfortably increase income without causing massive spikes in inflation. This also includes less regulation so that workers can strike without legal trouble and cause trouble for employers, by dragging the process through the court system will just mean more money for lawyers - and large companies have deep pockets anyway to fight any potential lawsuit. Think about how things like fraud are already illegal but companies seem to get away with it anyway. The only power labor has to collective withdraw it - which painfully show up in the balance sheet in every board room, its the only language capital understands.
- shkkmo 9y ago
  You obviously didn't read the article and appear to be just spouting talking points. The three laws proposed in no way impede small businesses. Prohibiting anti-poaching , Limiting non-competes, and considering the labor market effects of mergers will primarily impact large businesses. In fact, all those changes reduce friction and increase competition in the labor market. These should be precisely the kind of changes I would think you would support?
  - nopriorarrests 9y ago
Barrin92 9y ago
>In a new study for the Brookings Institution’s Hamilton Project, we report survey results in which we find that one in five workers with a high school education or less are subject to a noncompete. That by itself is a remarkable statistic. The original purpose of non-compete laws was to honor the value of an invention or trade secret and stopping key inventors from directly running away with an invention and thus lowering the incentive for innovation. But surely not every fifth worker with a high school degree or less in the market is a researcher or crucially involved in the generation of trade secrets. Many people are simply selling their labour, and this data point suggests that non-competes are being abused to an extreme degree simply to chain employees to a business.
- twblalock 9y ago
  I suspect many of those noncompetes would not hold up in court.
  - shkkmo 9y ago
    They don't have to hold up in court to have a significant chilling effect on the job mobility of the employee who signed it.
    - sjg007 9y ago
      There are a lot of things like this. Companies write all sorts of non-enforceable terms into contracts all of the time. That's why people should consult an employment lawyer when you start and end a job. Paying a few hundred dollars for a consult/review is worth knowing your rights.
      - cannonedhamster 9y ago
        Yup, my company had a clause that I could never talk bad about them in one contract. I refused to sign as I don't give away civil liberties for money. What amazed me was that almost no one else even bothered to read it before signing.

56 points by Caveman_Coder 9y ago

Not sure how declining union membership is laid out, and then strengthening union membership is not suggested.

I didn’t make a throwawy just for this — just happened to be logged in from last time I used it. Whatever points the article is making I’m sure are all wonderful, but I didn’t read it. I just read the headline and my immediate reaction was simply: No shit. Who are the people that need to be told this?

randyrand 9y ago
Why should this be obvious? Most people would assume the cost of labor is set no different than the cost of a bag of concrete or a gallon of milk - supply and demand.
- knuththetruth 9y ago
  I guess it depends on your definition of “most people.” I grew up poor and around poor people. No one thought wages were determined by supply and demand. It was always about what the boss could get away with.
  - skookumchuck 9y ago
    And employees negotiate for as much as they can get away with. Supply & demand.
    - chowells 9y ago
      Most employees get fired for trying that. Glibly saying "supply & demand" doesn't erase the massive power imbalance between employer and employee in most businesses.
      - skookumchuck 9y ago
        > Most employees get fired for trying that. If one goes about it like an @ss, and without doing one's homework, sure. The way to do it is to deliver value that is worth more money, and then approach management with a proven track record of you being worth more money. It worked for me.
        chowells 9y ago
        A very large percentage of employers don't have employees worth money. They have employees as cost centers, totally devoid of worth as humans or even resources. I know a lot of people who work for these companies. They have jobs like data entry or cashiers for massive corporations that have bought out all their local competition in their particular market. Their evaluation scale is purely "how often do they screw up?". I used to date a woman who had (for a short time) a data entry job. They were expected to make no more than 3 mistakes per month. There was no reward for fewer mistakes. Any more and your job was in jeopardy. Employees in these situations have the power to negotiate exactly when the loss of the job is not a significant threat to their life. Most employees with these jobs have them because they needed some job, any job, to keep their life together. The employers know this. Anyone who rocks the boat isn't an employee desperate enough to accept the abuse, so they aren't wanted there anymore. This is exactly the point the article was making. A non-negligible portion of the population has no alternative that's better than accepting this abuse.
        skookumchuck 9y ago
        Millions of people come to this country, legally and illegally. They come with nothing, often not even speaking English. But they seem to find decent jobs, move around the country to find those jobs, and are able to start businesses. I find this difficult to reconcile with your claim that people are forced to work for certain employers.
  - nopriorarrests 9y ago
    And the boss could get away with ignoring the law of supply and demand? How so?
    - IntronExon 9y ago
      Look to AAA game companies for a host of answers to that question. Treat your employees like burn&churn part timers, focus on assembly line kinds of output, hire them young, fire them young, etc.
      - nopriorarrests 9y ago
        So, abundance of supply, because young people want to make AAA games?
        IntronExon 9y ago
        That, and because most roles in most projects don’t require stellar talent, just the ability to shut up and code. If you’re willing and able to monetize a sub-par product, as so much of software from games to IoT seems to be, then it works. It’s all part of the race to the bottom we’re getting to live through.
- throwaway_54321 9y ago
  In my experience, “most people” simply aren’t that stupid. The assumption seems to be that greed and corruption are a default condition, and that there’s nothing we can do about it. I truly believe the average person —- who simply isn’t represented on HN —- is just resigned to this as a fact of life.
  - randyrand 9y ago
    There are a lot of positive externalities from greed: https://www.youtube.com/watch?v=F0VHiONkot8 https://www.youtube.com/watch?v=F0VHiONkot8
randyrand 9y ago
oops I commented on the wrong thread. original comment moved to here: https://news.ycombinator.com/edit?id=16488919 https://news.ycombinator.com/edit?id=16488919 (HN wouldnt let me delete this one)
- skookumchuck 9y ago
  The non-competes also look like they're unenforceable, even where they're legal.

whb07 9y ago

Before the cacophony of “we need better laws! More government!” Please reflect that all the wage suppression that is commented on the article comes from laws in the first place. It’s amazing to me that the solution presented by those who are anti laissez faire are more laws to correct the past laws. Market transactions only happen if they are mutually beneficial. Can’t force any side as this will distort it. Please look at the supreme labor laws found in Europe to find out what happens. To note, the Spanish, French, Italians face chronic young adult unemployment with roughly 1/4 people being employed.

Caveman_Coder 9y ago
> "Market transactions only happen if they are mutually beneficial. Can’t force any side as this will distort it." I think the modern assumption is that things are distorted, and they are heavily distorted in favor of business...
Analemma_ 9y ago
Nice strawman. Nobody says that, nobody is going to say that. The most commonly proposed solution to this problem is unions, but I bet that’s the one thing you hate more than laws so you won’t suggest it.

randyrand 9y ago

" In other words, in the labor market, effectively a small number of employers are competing for their labor" This is not what a monopsony is. That's an oligopsony. "Because most people sink roots in their communities, they are reluctant to quit their job and move to a job that is far away." The effect of this is a wash because this is also a problem for employers too. The supply of good workers is smaller because few people are willing to move towns for one - which drives labor prices up. "Unions used to offset employer monopsony power" Ahh, okay, now im understanding the point of this article. Lets fight monopolies with more monopolies instead of solving the underlying issues! I agree with the points about non-competes though.

Caveman_Coder 9y ago
> "Ahh, okay, now im understanding the point of this article. Lets fight monopolies with more monopolies instead of solving the underlying issues!" So you don't think unions have a place in modern day society?
- randyrand 9y ago
  I think unions should be tried for anti-competitive practices, just as any monopoly should. What is the difference between a bunch of carpenters unionizing their wages versus a bunch of small and large companies all agreeing to price-fix their products? Nothing.
  - scribu 9y ago
    What are some of those “anti-competitive” practices that you disagree with?
  - mikeash 9y ago
    Unions are no more monopolies than any random company is, and union bargaining isn’t collusion any more than a hiring manager consulting with HR is. When employers band together to bargain collectively, we call it a “company” and it’s not only accepted, it’s so entrenched in our culture that we can barely conceive of any other way. When employees do the exact same thing, we attack them relentlessly.

pembrook 9y ago

Two words: pay bands. Corporate HR policies in the modern era are essentially designed to commodify and drive down the costs of labor through information assymetry, rigid pay bands, and lawsuit mitigation. Since most labor no longer organizes to negotiate for themselves, obviously the “Industry standard” pay bands are going to have a strong dampening effect on any wage increases even in the case of a worker shortage. Most individuals alone don’t have the power or the information edge needed to beat an “industry standard” which has essentially been decided through collusion of the largest players in the market. See the direct email correspondence of Steve Jobs and Eric Schmidt for more info.

skookumchuck 9y ago
I've gotten pay significantly above HR's "pay band" and "policy", because I refused to work for less. Workers have power, too. They can refuse the offer. If you're an employer and you want good people, you'll find out real quick about their power.
- Daishiman 9y ago
  Yeah, lucky you being in a profession with an extremely high unmet demand. Not so good for the poor chumps working in retail who've been told that unions are bad.
  - skookumchuck 9y ago
    There's a wide variety in retail employees. They are not interchangeable. There's plenty of opportunity to show you're worth more.
bassman9000 9y ago
commodify Enter Scrum. One of the side effects: the more effective the process, the more replaceable and interchangeable the workers are. Granted, great for planning.

caseysoftware 9y ago

Hasn't the US labor participation rate been dropping for over a decade? If that is accurate, it makes sense that unemployment is down and still going down but wages aren't moving at all or as quickly. There's effectively "spare capacity" in the system in the form of people who were removed from the unemployment numbers but still wanted to work.

Xcelerate 9y ago

> Because most people sink roots in their communities, they are reluctant to quit their job and move to a job that is far away. How common is this? As a child, my father changed jobs every few years, and we moved often as a result of that (until I was 10 at least). We even lived in France for three years because my dad thought it would be a good opportunity to learn about other cultures. So personally, I've never had any objection to moving for the best opportunity. My wife on the other hand comes from a different background; she grew up in the same house in a rural town and thinks that moving hurts children's ability to develop friendships. She also believes that being close to family is more important than optimizing your career (although she has kindly agreed to move should a good opportunity arise). Is the "stay in one spot" viewpoint becoming more common? I can see how this would lead to competitive job offers stagnating in a region if no one is willing to move into it or away from it.

zitterbewegung 9y ago
It’s not becoming more common not all people have equal situations. Maybe you have parents that can’t take care of themselves. Maybe you can’t take of yourself. You could even like the weather or were you are born. Not everyone wants to live in New York or Silicon Valley. Not every person has rational actions or needs either .
flukus 9y ago
IME, it's very common, the default for most. Once you have kids and buy a house you've decided to stick to the same geographic area at least until the kids are adults. I'd guess it's even more common now that more children are living with single parents, one parent will be deprived of easy access to the kids if they were to relocate. It's the biggest reason people hate gentrification as well, they can quickly get priced out of an area they belong to.

snake_plissken 9y ago

I was surprised share buybacks were not mentioned. Seems like every company has been doing this over the past few years. I'm no finance guru: is there a reason buyback money couldn't be diverted into pay raises?

nopriorarrests 9y ago
Pay raises lower the stock price. Buybacks raise it. CEO compensation depends on stock price. That's all.
- Pokepokalypse 9y ago
  . . . because stock is taxed differently than income. This is a huge incentive behind how our system has become so broken.
  - 1123581321 9y ago
    No, it's because a buyback is purchasing an asset (a share of issued stock) and payroll is just an expense. You could argue that increased payroll increases retention which is valuable, but that's an indirect and uncertain way to increase the value of a company.

wrong_variable 9y ago

What is frustrating is the problem can be attacked even without introducing any new law. In many industries the reason employers have monopsopy power is regulations that prevents new players from eating the fat profit margins of incumbent players. telecom, healthcare, real estate, legal services ...... Just like coders see every problem as a software problem - lawmakers tend to think any problem can be solved with more laws ! not realizing they are also playing the economic game theory charade. In this case particularly, introducing more laws is going to make is harder for new players from gaining market share. I am not also just making this up, France has some of the most progressive labor laws written with the best of intentions - but lawmakers failed to see the economical ramification of their laws. It made employers reluctant to hire full time workers - creating a painfully high unemployment rate. A lot of American multinationals also have most of their growth happening outside US borders, I think stronger Unions and ill thought out reform is going to result in more aggresive offshoring. I know supply side economic arguments has gone out of fashion - but by allowing entrepreneurs to more easily embrace globalization the same way as larger companies exploit it will more comfortably increase income without causing massive spikes in inflation. This also includes less regulation so that workers can strike without legal trouble and cause trouble for employers, by dragging the process through the court system will just mean more money for lawyers - and large companies have deep pockets anyway to fight any potential lawsuit. Think about how things like fraud are already illegal but companies seem to get away with it anyway. The only power labor has to collective withdraw it - which painfully show up in the balance sheet in every board room, its the only language capital understands.

shkkmo 9y ago
You obviously didn't read the article and appear to be just spouting talking points. The three laws proposed in no way impede small businesses. Prohibiting anti-poaching , Limiting non-competes, and considering the labor market effects of mergers will primarily impact large businesses. In fact, all those changes reduce friction and increase competition in the labor market. These should be precisely the kind of changes I would think you would support?
- nopriorarrests 9y ago

Barrin92 9y ago

>In a new study for the Brookings Institution’s Hamilton Project, we report survey results in which we find that one in five workers with a high school education or less are subject to a noncompete. That by itself is a remarkable statistic. The original purpose of non-compete laws was to honor the value of an invention or trade secret and stopping key inventors from directly running away with an invention and thus lowering the incentive for innovation. But surely not every fifth worker with a high school degree or less in the market is a researcher or crucially involved in the generation of trade secrets. Many people are simply selling their labour, and this data point suggests that non-competes are being abused to an extreme degree simply to chain employees to a business.

twblalock 9y ago
I suspect many of those noncompetes would not hold up in court.
- shkkmo 9y ago
  They don't have to hold up in court to have a significant chilling effect on the job mobility of the employee who signed it.
  - sjg007 9y ago
    There are a lot of things like this. Companies write all sorts of non-enforceable terms into contracts all of the time. That's why people should consult an employment lawyer when you start and end a job. Paying a few hundred dollars for a consult/review is worth knowing your rights.
    - cannonedhamster 9y ago
      Yup, my company had a clause that I could never talk bad about them in one contract. I refused to sign as I don't give away civil liberties for money. What amazed me was that almost no one else even bothered to read it before signing.