Key Findings and Strategies for Reversing Our Shrinking Middle Class
LA County is thriving, but many middle-income jobs have left our region, and have been replaced with lower wage jobs. Real incomes are dropping and housing costs are spiraling. If unchecked, these trends will reduce standards of living for all of us, and put the American Dream out of reach for hundreds of thousands of our neighbors in LA County.
What strategies and actions will enable more Angelenos to live the American Dream of a middle-class lifestyle? Can our Low to Moderate Income (LMI) communities advance, if we better connect our underutilized labor to the innovative industries that drive the regional economy? Experts will discuss the roles of public policy, industry growth, education and the changing skills required by the jobs of the future, as we develop answers.
LAEDC’s Economic Forecast will also provide a valuable look ahead at projections for the national, state and local economy, with insights you can use to inform your decisions.
If these researchers are onto something—namely, that industry concentration dictates wage shares and wage levels—it could have important implications for how we think about antitrust enforcement and other labor policies (such as minimum wage, unionization, and state-based occupational licensing.
Wages are falling when expressed as a percentage of national income. The share of national income captured by labor (“labor share”) has declined sharply since the early 2000s, falling from 66 percent in 2000 to 58 percent in 2017 according to the Federal Reserve Bank of St. Louis. The decline in the labor share over the past 30 years reflects the gap between labor productivity (which has continued to grow) and compensation (which has stagnated).
The relevant economic questions are: What is causing wage growth to be so anemic? And what can be done from a policy perspective to accelerate it?
To say that there is lack of economic support [for the claim that immigrants have caused falling wages] is an understatement. The economic literature reveals that immigration does not reduce wages for native-born workers. Ottaviano and Peri (2012) and Borjas (2014) find that foreign-born workers (that is, earlier immigrants) bore the brunt of the wage impact from immigration, with native-born workers actually experiencing a slight increase in wages owing to immigration.
What is a plausible alternative for stagnating wage growth? Several recent studies have focused on the role of industry concentration. The working theory is that as firms gain control in product markets, the opportunities for job mobility within a given industry are restricted, which permits these firms to exercise buying (or “monopsony”) power in the labor markets.
MIT economist David Autor finds that concentration of sales of the largest firms in an industry (and of employment) has risen from 1982 to 2012 in each of the six major sectors covered by the U.S. economic census. —each percentage point rise in an industry’s concentration index (as measured by the share of shares accruing to the 20 largest firms) predicts a 0.4 percentage point fall in its labor share. In an effort to determine the causes of industry concentration, the authors further find that the fall in labor share is mainly due to a reallocation of labor toward larger and more productive (“superstar”) firms with “lower (and declining) labor shares, rather than due to declining labor shares within most firms.” Why their workers aren’t sharing the productivity gains of these “superstar” firms is an open question that deserves further research.
In Declining Labor and Capital Shares (2016), London Business School economist Simcha Barkai attributes most of the decline in the labor share to Continue reading “Forbes: While Some Blame Immigrants For Low Wages, An Alternative Theory Gains Traction Among Economists”
The Verdugo Workforce Development Board and its VJC are overseeing a retraining grant and program for qualifying people laid off from various local companies recently.
Click here to see flyer with detailed information.