There are many obstacles in finding a job in the United States. Some of these obstacles are socially constructed, such as more household responsibilities shouldered by women compared to men. Other obstacles are the result of a long discriminatory past, especially the immense inequality in household wealth between racial and ethnic groups. These obstacles inhibit workers from moving freely between jobs and thus give employers monopsony power—the power to push down wages when workers have few suitable outside options.

Because these obstacles more commonly confront women and non-White workers, employers have more power over such workers, which means employers can push their wages down more compared to White men workers. In a new working paper, we demonstrate how these racialized and gendered wealth disparities reinforce discriminatory pay penalties by examining how workers search for jobs. We find that institutional support for worker power—in the form of greater protections for collective action and a more pro-worker National Labor Relations Board that facilitates organizing through overseeing union elections and hearing unfair labor practice charges—can limit the ability of employers to exploit workers based on their gender or race and ethnic backgrounds.

Our model demonstrates how a variety of factors intersect to result in discriminatory wage outcomes for workers along the lines of race, ethnicity, and gender, and likewise shows that a suite of policies in tandem that address these broad constraints would lead to more efficient outcomes and higher levels of social welfare. Amid the life-altering circumstances brought about by the coronavirus recession and the subsequently swift shift in work-life balances among women frontline workers and workers of color in particular, pro-labor policies to strengthen collective action by workers in the United States is of paramount importance.

Read the full article about monopsonies by Kate Bahn and Mark Stelzner at Equitable Growth.