As a labor activist and entrepreneur, I like to research topics around the biggest issues affecting the wellbeing of workers as well as the health of labor markets. One big issue that comes up repeatedly concerns the root causes behind why workers’ incomes have not risen in real terms since the early 1980s. Upon close examination, it appears the main culprit is that employers are running a price fixing cartel in our free labor markets. Essentially, U.S. employers are running monopsony. Though cartel-like practices are currently legal under labor laws they are very illegal under anti-trust laws and corrosive to the free market. The question is why hasn’t anyone sued in anti-trust court? I believe this oversight is the root cause underlying some of the biggest issues of the day from the student loan crisis, to rising inequality, to ballooning deficits as all these phenomena are linked to the situation in our labor markets.

To illustrate, the practice of requiring prospective workers to provide their most recent salary information before salary negotiations has become universal since the 1980s. For a prospective employee, this practice means employers communicate, coordinate, and anchor their negotiating positions based on this salary history information. This effectively acts as a pricing signal between all prospective employers, allowing them to make comparable offers contributing to sticky up wages and salaries for job seekers. In other words, for any given worker selling a particular skillset on the labor market, almost all potential employers are communicating, coordinating, and anchoring the price they are willing to pay for that particular worker’s skillset. This has the same effect as employers actively colluding to form a cartel to coordinate salary offers for that employee. This is illegal under anti-trust laws and the salary history question is a smoking gun that illustrates that employers are running an OPEC type price fixing setup in our labor markets.

This explanation fits well with my personal experience and that of most American workers. For example, these cartel-like practices by employers mean the first salary we get upon entering the labor market after college exerts a disproportionate effect on your salary for a significant portion of our careers. I would hypothesize that one of the biggest predictors of current salaries is your first salary after college, regardless of skills gained, job changes, manager changes etc. I have also had an experience during a job search in which all prospective employers, as well as my current employer, offered me exactly the same amount. Not a cent different. That is how shameless this practice has become.

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