The right to collectively bargain is one we need to protect and strengthen for workers to increase their wages and gain upward mobility. Yet, our research shows that there is another important avenue for strengthening worker power: making it easier for them to find new, better-paying jobs.
High employer demand has already enabled workers to upgrade to better jobs, but this hot labor market might not last much longer — especially with the possibility of a recession on the horizon. Policymakers have the tools to empower workers to find new jobs even when market conditions aren’t tilted in their favor. Here are some measures the government could consider:
Antitrust laws and enforcement have traditionally focused on increasing competition for products or services such as oil, health care or telecommunications. But it’s important that our labor markets are sufficiently competitive, too. In a competitive labor market, employers must compete with one another for workers through pay, benefits or working conditions. Research shows that when jobs are concentrated among a small number of employers, workers are more likely to earn lower wages.
Policymakers could start by more closely scrutinizing corporate mergers for signs they could decrease competition for workers. Regulators should keep a close eye on mergers of large companies that compete for the same workers in a specific labor market. One study found, for instance, that hospital mergers resulted in lower wages for nurses and pharmacy workers.
President Biden signed an executive order last year aimed at stimulating competition across the economy — including labor markets. Among its directives, the order encourages the US Department of Justice and Federal Trade Commission to step up enforcement of antitrust measures that prevent employers from sharing wage and benefits data with each other and potentially colluding to suppress wages.
Limit or eliminate non-compete agreements
Non-compete agreements prevent workers from leaving their current employer for a competitor or even starting their own business. These agreements can be particularly harmful to low-wage workers, who are more likely to see an increase in pay by switching employers rather than through an internal promotion. Non-compete agreements diminish earnings and job mobility and exacerbate racial and gender wage gaps. And they’re not uncommon in low-wage industries, where more than one in 10 low- or moderate-income workers are bound by a non-compete.
Several states have banned non-compete agreements for low-wage or hourly workers — and some have banned them entirely. Bipartisan support is emerging at the federal level for limiting non-compete agreements to cases when they are required to dissolve a partnership or sell a business. Policymakers should more broadly consider banning any agreement that impedes an individual worker’s ability to change jobs or careers.
Reform occupational licensing laws
Occupational licensing requirements have grown considerably over the decades: In 1950, about 5% of the workforce was required to be licensed, compared to about one-quarter now. The laws are designed to protect consumers in fields such as health care or construction where an unlicensed practitioner could inflict serious harm to public health and safety. They also signal to consumers that a practitioner meets a minimum standard for quality and skills.
Yet licensing also limits opportunity and geographic mobility for workers, since the requirements vary considerably from state to state. Further, workers often have to pay the upfront costs for obtaining a license and continued costs for renewing it. Since licensing serves as a barrier to entry, it can diminish employment opportunities and depress wages of unlicensed workers with similar levels of training and experience.
On the flip side: Because they limit labor supply, licenses are incredibly valuable for workers who obtain them. Licensed workers typically earn higher wages than their unlicensed counterparts, and in certain cases, provide workers with guidelines around professional development and training. Licenses have also been found to reduce racial and gender wage gaps.
The solution here is not to eliminate occupational licensing completely, but rather to reform laws in ways that make licenses more portable across state lines and limit licensing to fields with legitimate risks to public health and safety.
Correct the information asymmetry between workers and employers
Employers often know much more about workers than workers know about jobs or employers. When workers apply for jobs, they often encounter an information vacuum about wages, benefits, scheduling or workplace culture, which has real consequences for their wages and ability to advance their careers. A study from Germany found that workers earning low wages were more likely to believe that other jobs also paid low wages, even when it wasn’t the case.
Having access to more information about employers and specific jobs could empower workers to apply for more open positions — or at least equip them with the information to decide whether to apply at all.
At the same time, giving workers the right to withhold information such as their own salary history could give them leverage when negotiating wages. Dozens of states and cities have enacted salary history bans, leading to higher than average wage increases for women and nonwhite workers.
Of course, unions are an important piece of the puzzle when it comes to worker empowerment, but not the only piece. Policymakers should support a worker’s chances to have abundant outside job offers — even when the market turns, as it inevitably will.
