Optimist Economy The Great Wage Stagnation
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Apr 21, 2026 They trace wage stagnation since the 1970s and show how changing workforce composition hides the problem. They explore explanations from skill-biased tech and trade to shrinking unions and weakened labor standards. They introduce monopsony and employer concentration as a modern driver. They discuss evidence from fast-food wage hikes and policy ideas like stronger labor law and antitrust enforcement.
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Skill Bias And The Tight Labor Market Myth
- Early explanations blamed skill-biased technical change and globalization for diverging wages: college-educated workers gained while others lost ground.
- The model implies wages only rise in very tight labor markets (unemployment ~4% or lower), making policy seem powerless.
Monopsony Explains Lost Worker Bargaining Power
- Monopsony reframes the problem: employers concentrate market power so workers face few hiring options and weaker bargaining power.
- Joan Robinson's 1930s critique of perfect competition revived as modern research shows rising employer concentration.
Rising Employer Concentration Measured By HHI
- Economists measure employer concentration with the Herfindahl-Hirschman Index and find increasing concentration each decade since the 1970s.
- Corporate consolidation on the consumer side tracks with growing employer market power.