The Declining Worker Power Hypothesis: An explanation for the recent evolution of the American economy

Anna Stansbury · Lawrence H. Summers

156 citations0/0 files storedNational Bureau of Economic Research

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Labor market dynamics and wage inequality Labor Movements and Unions Economic Theory and Policy

Abstract

Rising profitability and market valuations of US businesses, sluggish wage growth and a declining labor share of income, and reduced unemployment and inflation, have defined the macroeconomic environment of the last generation.This paper offers a unified explanation for these phenomena based on reduced worker power.Using individual, industry, and state-level data, we demonstrate that measures of reduced worker power are associated with lower wage levels, higher pr ofit shares, and reductions in measures of the NAIRU.We argue that the declining worker power hypothesis is more compelling as an explanation for observed changes than increases in firms' market power, both because it can simultaneously explain a falling labor share and a reduced NAIRU, and because it is more directly supported by the data.

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2018The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment 1992Earnings Losses of Displaced Workers 1996Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach 1999High Wage Workers and High Wage Firms 1984What do unions do 1988Bargaining Structure, Corporatism and Macroeconomic Performance 2020The Fall of the Labor Share and the Rise of Superstar Firms*2013The Global Decline of the Labor Share*

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