Economic context

New and Noteworthy: New research on labor market competition, degree resets in job posting, and more

Archana Pyati April 26, 2022

Dear WorkRise community,

This month’s New and Noteworthy column highlights a new study from the Biden administration on the growth of employer power in the labor market and how this imbalance affects workers. This study surfaces insights from economics literature that, for many years, has described the US labor market as insufficiently competitive, resulting in lower wages and rising income inequality. We also share new research that reveals racial and gender gaps in unemployment and paid leave sick benefits during the COVID-19 pandemic. Is there new research on mobility in the labor market that WorkRise should amplify? Write to us with your ideas at apyati@urban.org. Thanks for reading!

Research

Labor Markets

Employer competition and power in labor markets: A recent US Treasury report finds that the US labor market lacks competition among employers, giving employers market power to lower workers’ earnings. The report is one result of an executive order on promoting competition in the economy issued last July. Based on an assessment of multiple empirical studies, the report concludes that employers’ increased market power has led to a roughly 20 percent decline in workers’ wages compared with what would be observed in a fully competitive labor market. Economists refer to a labor market in which employers have power to set wages below competitive rates without losing workers to other firms as a “monopsony.” The Treasury report outlines the following practices that have allowed employers to accrue more power and limit workers’ compensation:

  • noncompete agreements or other restrictive covenants that limit workers’ ability to switch jobs and raise their wages
  • outsourcing of services such as housekeeping, legal services, security, or food provision to reduce employers’ costs, also called workplace “fissuring”
  • regulatory arbitrage, in which employers exploit loopholes to avoid paying higher wages or improving working conditions
  • occupational licensing requirements that pose barriers to entry and reduce labor supply
  • and misclassification of employees as independent contractors, depriving them of workplace protections and social insurance programs guaranteed to employees

The report also notes that the decline of traditional labor unions has led to an erosion of workers’ bargaining power. The report makes several recommendations for increasing worker power and competition in the labor market, including passing legislation to support worker organizing and union formation, beefing up antitrust enforcement in labor markets, and reforming rules around occupational licensing. You can dive deeper into the theoretical concepts and empirical literature cited in the report in a recent special issue of the Journal of Human Resources dedicated to the topic of monopsony in the labor market. The issue was coedited by labor economist and Nobel Laureate David Card, whose work is also cited in the Treasury report.

Federal Policy

Equity and measurement in unemployment insurance (UI): A new California Policy Lab report shares insights on the inequitable access to UI benefits workers experienced during the COVID-19 pandemic and ways to improve both measurement and equity in the UI system. Analyzing individual-level data on UI claimants in California, researchers found there were wide disparities in the recipiency rate, or the share of unemployed workers who successfully receive benefits after filing a claim. Higher-income counties and those with greater access to broadband internet were associated with higher recipiency rates. Counties with larger shares of Latinx/Hispanic residents, lower levels of English proficiency, and higher rates of COVID-19 had lower recipiency rates. Researchers also found disparities in weekly benefit amounts among different groups of workers, even though supplemental UI benefits during the pandemic boosted income for most workers. Men, white workers, and more educated workers received higher benefit amounts compared with other groups. The report also shares a new measure of unemployment that reflects the number of people experiencing unemployment each week, rather than the number of UI claims certified each week, which is how UI is currently measured. Researchers say this new metric, called “entries into paid unemployment,” is a more accurate indicator of who is entering or reentering the UI system.

Employer Practices

Voluntary paid sick leave expansions among large employers: New research from the Shift Project shows voluntary expansions of paid sick leave benefits during the pandemic among large employers were modest. Passed by Congress in March 2020, the Families First Coronavirus Response Act exempted businesses with more than 500 employees from a requirement to provide paid sick leave benefits. Based on surveys of service-sector workers conducted from March to May 2020, researchers found 17 percent of hourly workers reported their employers expanded paid sick leave in response to the pandemic. Women and people of color were concentrated at companies that did not expand leave. Survey respondents who said their employers expanded leave reported higher levels of job satisfaction and that they were less likely to work while sick.

Search and Matching

Degree resets in job postings: A new Burning Glass Institute report finds employers were removing degree requirements from job postings before the COVID-19 pandemic and currently, in a tight labor market in which there are more openings than workers to fill them. Based on an analysis of 51 million job postings, researchers find 46 percent of middle-skill and 31 percent of high-skill occupations experienced a “degree reset” between 2017 and 2019, suggesting a reversal of degree inflation in years following the Great Recession. Most of these resets are the result of long-term shifts in hiring practices that predate the pandemic, which has accelerated the demand for “sub-BA” jobs. The report also notes that when employers remove degree requirements from postings, they are more specific in the skills or attributes they seek, suggesting that college degrees act as proxies for these skills or attributes. These resets—particularly for middle-skill occupations, which may require some postsecondary education or training but not a four-year degree—could open pathways to upward mobility for workers without college degrees, who make up two-thirds of the US labor force.

Perspectives on the skills gap debate: A new Congressional Research Service report (PDF) provides a helpful primer on debates about skills gaps and shortages. The purpose of the report is not to affirm or deny the existence of a skills gap in the labor market but rather to outline key arguments in the debate from the perspective of employers, who routinely complain of skills gaps or shortages, and workers, who say low wages and poor working conditions and job quality contribute to shortages. The report, which reviews indicators and evidence of skills gaps from industry and government surveys, finds “available data do not reveal a clear skills mismatch in the economy, but they also do not rule one out.” The report notes there are significant data gaps that make assessing workers’ skill levels or employer practices related to upskilling hard to measure. For example, a standardized measure of soft skills in the workforce has yet to be developed, and a federally sponsored, nationally representative employer-provided training has not been fielded since 1995.

Announcements and Events

Measuring job quality: The Families and Workers Fund has launched the Job Quality Measurement Initiative in collaboration with the US Department of Labor, the Omidyar Network, Lumina Foundation, and Ford Foundation. In a news release, the fund notes that although the US measures how many jobs the economy creates every month, little is known about the quality of those jobs. The initiative convenes a network of nearly 70 researchers and data experts and draws guidance from leaders in business, labor, workforce development, and policy. Bill Congdon, senior fellow at the Urban Institute and research director for WorkRise, serves as the cochair of the administrative data working group.

JFF annual conference: Horizons, Jobs for the Future’s annual conference, will be held June 7–8 in New Orleans. One theme of the conference, which convenes leaders in workforce development, business, postsecondary education, philanthropy, and policy, is racial economic equity for Black learners and workers. Register here.

Topics in the News

More states adopt paid leave: The state of Maryland has joined nine other states and the District of Columbia in requiring employers with 15 or more employees to offer paid family and medical leave. The measure was passed by the Maryland legislature, overriding a veto by Governor Larry Hogan. Employer contributions will begin next year, and employees can apply for benefits in 2025.

Inclusive hiring: JP Morgan Chase has eliminated questions about criminal records from its job applications and has established a pipeline for candidates with disabilities in nine countries, according to CNBC. The bank has hired thousands of people with criminal records and hundreds of people with autism and other conditions, said Brian Lamb, global head of diversity, equity, and inclusion, in a CNBC forum earlier this month.

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