When we talk about inclusive prosperity, what's top of mind is usually the 40-plus years of stagnation for the bottom 90% of American wage earners that began in the mid-1970s. It’s been the primary driver today’s record levels of inequality. University of Massachusetts economist Arin Dube has spent a significant portion of his career studying what caused that pay gap, which began with a decoupling of wage growth from productivity growth, and ways to address it. In fact, he’s been called the “go to guy on minimum wages” by Nobel Prize-winning economist Paul Krugman. Now Dube has a new book titled “The Wage Standard: What's Wrong in the Labor Market and How to Fix It,” where he argues that U.S. wage stagnation has not been about irresistible economic or societal forces, but instead mostly about policy choices. Among those choices has been a reluctance among politicians to raise the minimum wage—including the federal minimum wage, which he says at $7.25 per hour is so low that it’s functionally like having no minimum at all. His research has gone a long way to dispelling stubborn myths about minimum wages that have persisted despite growing empirical evidence to the contrary, but also to explain other forces driving employment monopsony—the market condition where a small number of employers effectively control the market for jobs and pay. To address those forces, Dube is advocating a number of measures ranging from trading slightly higher inflation for tighter labor markets to sectoral bargaining and stronger unions.
Resources mentioned in this episode:
The Wage Standard: What's Wrong with the Labor Market and How to Fix It (book)
Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies (paper)
About our Guest:
Arin Dube is the Provost Professor of Economics at the University of Massachusetts Amherst. His research focuses on labor economics, along with health economics, public finance, and political economy. His current areas of research include wage inequality, the importance of labor market competition, minimum wage effects on employment and inequality, the role of fairness concerns at the workplace, the interplay of behavioral biases and labor market power, the impact of unemployment benefits, and the role of firm wage policies in explaining the growth in inequality. He has also conducted research on employer health mandates; unions and collective bargaining; outsourcing and sub-contracting; gun laws and violence; and capitalization of private information in stock prices. Dube received his B.A. in Economics and M.A. in Development Policy from Stanford University, and his Ph.D. in Economics from the University of Chicago. He has previously held positions of Visiting Professor at the MIT Department of Economics and Boston University’s Questrom School of Business. He is a NBER research associate, a research fellow at IZA, and a research affiliate of the MIT Stone Center on Inequality and Shaping the Future of Work.