The declining power of workers is a national crisis with both economic and socio-political consequences.
The declining power of workers is a national crisis with both economic and socio-political consequences. Labor’s share of national income has declined relative to capital’s since the 1980s, despite workers’ increased productivity. Workers’ bargaining leverage, generated through viable voice and exit options—their ability to strike a better employment bargain through leverage-backed demands at work (“voice”) or credible quit threats for other, better opportunities (“exit”)—has declined as workers face higher labor market concentration, anticompetitive employer conduct, low union density, and eroded labor protections and enforcement. This declining power increases income inequality, which can slow economic growth and increase economic instability, debt, and inflation. In social and political terms, income inequality can impact productivity, intergenerational mobility, health and well-being outcomes, and even democratic participation and political stability (including political polarization).
Declining worker power is the product of law, economic governance, and decisions within our governmental institutions and regulatory agencies. In the past, when economy- or sector-wide crises emerged in other areas—whether in system-wide national security failures before 9/11 or regulatory breakdowns leading up to the financial crisis—scholars and policymakers understood that discrete regulation by separate agencies was insufficient: A broader, whole-of-government effort was necessary. Such an effort has radical consequences: Congress and the executive branch worked together to pass legislation, restructure government, establish new agencies, redesign interagency coordination, and create redundancies and oversight to reshape public policy and how public institutions effectuate it.
Yet no similar effort has been directed at our labor market crisis, despite legal and institutional contributors to that crisis. Judicial rulings, congressional action and inaction, and government underenforcement has eroded our “labor justice system”—the network of laws, government institutions, and rights allocations that set the parameters of worker power—reducing labor’s bargaining leverage against capital. Millions of workers are excluded from legal protections, and those who are not must navigate dozens of fractured and decentralized agencies with underlapping and overlapping jurisdiction that impacts the range of their voice and exit options. Similar to the failures of the financial crisis, the failures in American labor markets are the product of weakened and absent market institutions. These institutions no longer facilitate fair exchange in accordance with broader economic governance goals that include combatting unequal bargaining power between employers and workers and ensuring worker voice and participation in the terms and conditions of their employment. Fundamentally, this brief argues that a whole-of-government approach is required to address these failures and strengthen labor market institutions. To do so, all agencies whose regulatory purviews impact the employment bargain should build into their policy approach mechanisms for ensuring that their programs and policies affect worker power in the labor market.
The Biden administration is the first to recognize and begin operationalizing a whole-of-government approach to worker organizing and labor market competition in order to address declining worker power.
The Biden administration is the first to recognize and begin operationalizing a whole-of-government approach to worker organizing and labor market competition in order to address declining worker power. In two executive orders, President Biden mobilized the Federal Government’s “full authority” to promote and implement policies that both “encourage worker organizing and collective bargaining and . . . promote equality of bargaining power between employers and employees,” and, on the other hand, create a “competitive marketplace” for workers with “more high-quality jobs and the economic freedom to switch jobs or negotiate a higher wage.” The Orders created a Task Force on Worker Organizing and Empowerment and a White House Competition Council, both of which include top White House and cabinet-level officials, to establish and coordinate policies that strengthen worker power. And for the first time ever, the labor and antitrust agencies have signed Memoranda of Understanding to share information, train agency staff, and refer investigations to strengthen enforcement against employers with buyer power.
These commitments are pivotal but remain in the earliest implementation stages. Their success in achieving a full, whole-of-government approach will depend on presidential engagement and robust coordination and execution across the executive branch and the administrative state. Establishing clear benchmarks, building top-down and bottom-up personnel relationships, and adopting stronger interagency procedures is critical for sustainable success to emerge from the fragmented components of labor policy execution. Much more than fulfilling on-paper commitments will be required to increase worker power. A whole-of-government approach will require integrating a broader set of agencies (including at the state and local levels), fine-tuning and recalibrating macroeconomic policy through interagency coordination, and establishing a unified and coherent set of substantive guidelines and metrics for triggering legal duties, presumptions, and liabilities on employers when enforcers establish strong employer power or weak worker power.
This issue brief first outlines the sources of declining worker power (Part I). It then identifies the various government institutions and authorities that impact the trajectory of worker power, delineating mechanisms they can deploy to reverse that decline under a whole-of-government approach (Part II). The brief then expands a whole-of-government approach to macroeconomic policy to tackle employer power even during periods of inflation (Part III).