MIT Sloan Assistant Professor Nathan Wilmers
From The Hill
Slow wage growth since the Great Recession has been puzzling. As the economic recovery has clocked eight years of growth, unemployment has dropped, but real median wages have barely increased.
Commentators have looked for explanations in everything from the rise of artificial intelligence to the scarring effects of the decade-old economic crisis.
However, slow U.S. wage growth has a longer history. Relative to the rapid growth marking the post-World War II period, median real wages have grown little since the 1970s (except for the economic boom of the late 1990s).
A growing body of research points to the decline in worker bargaining power as a core explanation. The long membership decline of labor unions has made it harder for workers to demand higher pay.
Nathan Wilmers, Assistant Professor, Work and Organizational Studies
From Washington Center for Equitable Growth
Stagnating wages among U.S. workers since the 1970s is well-documented. Also well-known is the outsized—and still growing—market impact of a small number of giant retailers such as Amazon.com Inc and Walmart Inc. What is less known is whether these two trends are linked.
In research I’ve been conducting—detailed in an article recently published in the American Sociological Review—I’ve found that increased pressure from large corporate buyers decreases wages among their suppliers’ workers. The growing influence of these buyers on workers’ wages is significant enough that it accounts for around 10 percent of wage stagnation since the 1970s. My findings show how shifts in market power have affected workers’ wage growth.
Relative to the postwar economic boom, U.S. workers’ pay growth has slowed by around one-half since the 1970s. During that same period, market restructuring has shifted many workers into workplaces heavily reliant on sales to outside corporate buyers. Large retailers such as Walmart and Amazon wield increasing power against manufacturing suppliers and warehousing and shipping contractors. When this happens, big corporate buyers are able to demand lower prices for the goods and services they are buying, and suppliers and contractors must sell at lower prices and try to cut costs. Likewise, companies increasingly outsource noncore functions, including food service, janitorial, and security jobs, a phenomenon known as the fissured workplace. The result is that more and more workers are employed by intermediate employers, which in turn rely on sales to outside corporate buyers.