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The Invisible Hand Slaps Millennials in the Face
August 29, 2019
Google and other cool technology companies have set the employee-keep-happy standards in Silicon Valley. Games, yoga, personal time. These fit into the companies’ shareholder obligations, which despite the do-gooder pretense, always come back to profit.
That’s what the invisible hand is all about, right? It’s actually in the company’s best interest to treat employees well because then the company attracts good employees and keeps them happy, which increases worker productivity, in turn increasing profitability and sales, and then more sales follow because the company can market its good reputation.
But there are a few things that distinguish employees of cool tech companies from, say, those of an auto manufacturer. It’s the skills of the workers and their choices in employment. Actually, if you want to make a complete list, you can look at the factors that create employer monopsony power.
An employer has monopsony power when its employees don’t have a choice to go elsewhere. The employer can exploit the circumstances and pay less for labor than the competitive market demands.
Labor unions, when they work well, balance out the disparate bargaining power between companies and workers and provide a voice for employees. These days labor union membership is down dramatically from the good ol’ days.
Our special Labor Day report reviews the current state of labor unions and worker protections. The need for worker protections today are greater than a generation ago, and it’s worth a united evaluation of how unions or the government can help.