New Treasury Report Highlights How Employer Power in Labor Markets Drives Down Wages and Reduces Freedom

The Treasury Department released Monday a wide-ranging new report on the State of Labor Market Competition. The report helpfully highlights the ubiquity of employer power in labor markets, pointing out that some ability to unilaterally set wages is likely inherent in the employer-employee relationship, necessitating policies like minimum wages and institutions like collective bargaining as core features of fair labor markets.

But, importantly, the report also makes clear that this baseline power imbalance has been exacerbated by factors deunionization, the declining value of the minimum wage, workplace fissuring, and increasing concentration of corporate power.

This report follows President Joe Biden's Executive Order on Promoting Competition in the American Economy on July 9, 2021, which brought a welcome new focus on employer power and unfair competition in the labor market.

In response, Barry Lynn, executive director of the Open Markets Institute, issued the following statement:

"We applaud the Treasury's emphasis in this report on the negative effects of coercive contracts like non-competes and no-poaching agreements, and on legal gimmicks like misclassification and fissuring that often place workers outside the protections of either antitrust or labor laws. We also strongly encouraged by the focus on the threat posed to workers by monopsony power.

"We are concerned, however, by the report's focus on occupational licensing. While occupational licensing is a complex issue, it simply is not an important contributor to wage suppression and can indeed enhance worker power and raise wages.

"We look forward to continuing to work with the Biden administration as it aims to protect workers and the health of the economy from unfair competition in labor markets. Now that the reports are finished, it is time for concrete actions to protect America's workers, such as a ban on non-compete clauses and strong moves to break the chokehold of monopoly in our labor markets."