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Title: The Declining Worker Power Hypothesis: An Explanation For The Recent Evolution Of The American Economy

Citation Type: Working Paper

Publication Year: 2020

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Abstract: Rising profitability and market valuations of US businesses, sluggish wage growth and a declining labor share of income, and reduced unemployment and inflation, have defined the macroeconomic environment of the last generation. This paper offers a unified explanation for these phenomena based on reduced worker power. Using individual, industry, and state-level data, we demonstrate that measures of reduced worker power are associated with lower wage levels, higher pr ofit shares, and reductions in measures of the NAIRU. We argue that the declining worker power hypothesis is more compelling as an explanation for observed changes than increases in firms’ market power, both because it can simultaneously explain a falling labor share and a reduced NAIRU, and because it is more directly supported by the data.

Url: https://www.nber.org/system/files/working_papers/w27193/w27193.pdf

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Authors: Stansbury, Anna; Summers, Lawrence H.

Series Title: NBER Working Paper Series

Publication Number: 27193

Institution: National Bureau Of Economic Research

Pages: 1-139

Publisher Location: Cambridge, MA

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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