CHARTING THE REFORM PATH.

AuthorPaul, Sanjukta
PositionAnnual Book Review Issue

INEQUALITY AND THE LABOR MARKET: THE CASE FOR GREATER COMPETITION. Edited by Sharon Block and Benjamin H. Harris. Washington, D.C.: Brookings Institution Press. 2021. Pp. xix, 241. $37.99.

INTRODUCTION

Markets abhor a coordination vacuum. Dismantling one market-coordination mechanism without attention to what will replace it does not lead to markets that are self-coordinating. Instead, it seems to open up space for other, potentially more pernicious forms of market coordination. More generally, competition by itself does not create self-regulating markets: the role of law in selecting market-coordination mechanisms and channeling economic competition in particular directions is essential. The current conversation around competition and labor markets has yet to truly integrate these deceptively simple points.

Consider an example. The American trucking industry once supported stable, middle-class jobs. (1) For much of the mid-twentieth century, the trucking market was coordinated through joint decisionmaking by unionized workers, relatively stable firms, and an active administrative agency (the Interstate Commerce Commission). But in the late 1970s and 1980s, driven not only by the rise of Chicago School thought but also by preexisting criticism of the public coordination of trucking markets, this system was overhauled. The changes were motivated by the basic idea that licensing and other limitations upon market entry should be disfavored because they limit competition. (2) Trucking deregulation led to unstable price competition between firms; nonunion entrants were able to underprice unionized incumbents due to lower labor costs, capturing their market share and soon driving deunionization across the industry. (3) Without unions to help ensure a wage floor, wage competition soon turned good jobs into "sweatshops on wheels," requiring drivers to work longer for the same or lower wages. (4) Deregulation and the subsequent transformation of the trucking market also coincided with major shifts in antitrust law, particularly relating to the emergence and persistence of large, dominant firms. (5) As such, powerful buyers of trucking services, including big-box retail stores, brands, and shipping lines, often took on informal market-coordination roles, particularly in subsectors like port trucking. (6)

The story of trucking deregulation illustrates--and this Review further elaborates on--the ubiquity of market-coordination mechanisms, the ever-present role of law in selecting them, and the resulting elusiveness of the competitive ideal, in the abstract, as a normative benchmark for regulation. While "deregulation" was and continues to be expressly framed as the withdrawal of law from markets, it in fact entailed the replacement of one legal regime for allocating coordination rights with another. (7) Frequently, when researchers describe a "more competitive" outcome, or the outcome that would obtain in an ideal competitive market, they are really describing the outcome that would obtain in a hypothetical market constructed by their preferred coordination mechanism. This does not mean that business competition, channeled appropriately, cannot improve outcomes for workers and the public--quite the opposite. But it does mean that the abstract ideal of a competitive market may be less than useful as a normative benchmark for law and for well-functioning labor markets. Sharon Block and Benjamin H. Harris's Inequality and the Labor Market: The Case for Greater Competition, (8) an edited volume of policy oriented essays, is a valuable contribution to the developing conversation about competition and labor markets that reminds us of the importance of recentering the role of law in selecting market-coordination mechanisms.

  1. FAULT LINES IN THE DEBATE OVER COMPETITION AND LABOR MARKETS

    The scope of the conversation in the United States about antitrust law, competition and monopoly, and the organization of markets has significantly broadened in recent years. (9) Prior to this disruption, and since the 1970s, the analytic framework in antitrust law--which influences many other areas of policy thinking relating to the organization of markets--had coalesced to a remarkable degree of unanimity. Broadly speaking, this analytical consolidation had two elements: the deletion of normative concerns not readily cognized within neoclassical economics' modeling of markets (such as nondomination and fairness); and the elevation of one particular consideration--operational efficiency (presumed to follow from scale and from certain forms of vertical control)--within the neoclassical approach to markets, over an emphasis on competition and over concerns not cognizable within the framework. (10)

    In recent years, a number of normative concerns--some of which had been pressed by dissenting voices all along--have reentered the mainstream conversation: understanding fair economic competition as an instantiated, real-world process rather than a theoretical ideal; (11) curbing vertical control (12) as a mechanism of economic and market organization and replacing it with more horizontal forms of cooperation; (13) pursuing substantively egalitarian economic outcomes; (14) curbing the outsized influence of the economically powerful in elections and government; (15) and reorienting consumer protection from a narrow view of consumer sovereignty to substantive goals of fairness and consumer protection. (16) The relationship of these concerns to a neoclassical concept of competition remains somewhat ambiguous: while "some are cognizable in terms of welfare economics, others appeal to a broader set of democratic and institutionalist values.... [T]hese distinct values sometimes align ... while in other instances they are in tension." (17)

    The renewed attention to workers, who have long been sidelined (or worse) in antitrust thinking, (18) is often cited as part of the widening of antitrust concerns, and at a broad level this is true. (19) However, the most influential strain of the recent discussion about labor markets and competition has not been particularly enthusiastic about the normative pluralism (20) present in the broader debate about antitrust law, instead mainly encouraging the extension of existing legal frameworks to labor markets. Some of the most prominent representatives of this strain say so explicitly: Eric Posner states in his new book that his "argument uses the traditional antitrust methods that are currently dominant in courts and academic scholarship.... [T] he problem has not been that antitrust law has the wrong economic goals; it is that antitrust has almost never been applied to labor markets." (21) Block and Harris's volume is not quite so unequivocal, though it is closer to this strain of the conversation than to the one pressing a normative broadening. As such, it provides a snapshot of the current conversation and furnishes a natural location to query some of its underlying fault lines.

    While the essays in Inequality and the Labor Market vary in orientation, they are united by a basic policy outlook: inequality, both between high-wage and lower-wage workers and between owners and workers, is high; wages, especially for low- and mid-wage workers, are low; collective bargaining is an essential mechanism for coordinating markets, but collective bargaining law and institutions are currently not very functional; and purchasers of labor are using oppressive contractual terms to seal their advantages over sellers of labor. Another substantive common thread of the volume is the focus on (relatively unchecked) corporate power as a factor in labor market outcomes. (22) Generally speaking, the contributors to this volume, mainly lawyers and economists, are professionally committed to improving the position of workers. (23)

    At the broadest level, the volume evokes a choice between two distinct and ultimately incompatible possibilities: on the one hand, restoring a competitive labor market, and on the other (articulated more faintly and implicitly), exposing the "myth" of this very goal, (24) which in turn would imply the need to construct an entirely new normative benchmark. The editors and contributors largely seem to espouse the goal of restoring a "competitive market," describing desired reforms in these terms. The name of the conference from which the essays originate indicates this analytical perspective: "Unrigging the Market: Convening to Restore Competitive Labor Markets" (p. xix). This name implies that the North Star for evaluating policy is a "competitive labor market," one in which wages are set "by the market" and "[w]orkers are ... paid their marginal product or their economic value to the company." (25)

    At the same time, the lead essays (particularly the economists' essays) are quick to point out that the actual existence of such a labor market is "wildly implausible" (p. xii). And a few essays point more affirmatively in another direction--toward a vision of markets and the economy that acknowledges that there are a variety of markets constructed by a variety of moral, political, and social choices; that prices and wages are always a result of these moral, political and social choices rather than value-neutral, impersonal market forces independent of those choices; and that, as a result, we cannot circumvent moral decisionmaking by appeal to "market prices" or "market wages." (26) Despite this, as further described in the next Part, the editors seem to hold such a market out as the basic normative benchmark for evaluating and thinking about labor market policy.

  2. COMPETITIVE MARKETS: THE VERY IDEA

    The concerns and arguments contained in Inequality and the Labor Market can be roughly divided into two categories. In one category, the book highlights certain legal strategies, policies, and reforms that would (presumably) help workers. These include concrete enforcement actions available (or plausibly available)...

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