Podcast Summary
Measuring the power struggle between workers and employers: Economist Aaron Sojourner's new labor leverage ratio indicates the balance of power between workers and employers, revealing instances of workers pushing for better wages and conditions versus employers prioritizing profitability during the pandemic.
The relationship between workers and employers continues to be a contentious issue in the labor market. While the economy added more jobs than expected in April and wage growth remained steady, the power dynamics between workers and employers remain a significant factor. Economist Aaron Sojourner, who has spent much of his career studying labor, introduced a new indicator called the labor leverage ratio to help measure this power struggle. This ratio compares the number of workers to the number of jobs available, shedding light on which side holds more power in the labor market. During the pandemic, we've seen instances of workers pushing for better wages and conditions, while employers prioritize their own interests, such as maintaining profitability. The labor leverage ratio provides valuable insights into this ongoing power struggle and can help inform policy decisions.
The distinction between workers quitting and being let go matters for labor market dynamics: A high quits-to-layoffs ratio signals workers have more power and can negotiate for better wages or conditions, while a low ratio indicates employers hold more power
The distinction between workers who quit and those who are laid off or fired is important when analyzing labor market dynamics. According to Aaron, labor economist at the W.E. Upjohn Institute For Employment Research, these two scenarios represent different situations. Workers quitting indicate they have multiple job offers and feel strong in the labor market, while employers let go of workers when they have better candidates or prefer not to keep them. The ratio of quits to layoffs and firings, known as the labor leverage ratio, can signal which group holds more power in the labor market. When the ratio is high, indicating more quits than layoffs, workers have the upper hand and can negotiate for higher wages or better conditions. Conversely, a low ratio, with more layoffs than quits, indicates employers have more power and can keep wages steady or be stricter with their workers.
Labor Leverage Ratio Indicates Balanced Power in Job Market: The labor leverage ratio, a new economic indicator, measures the balance of power between employers and employees by calculating the number of workers quitting versus those being fired. In March 2023, the ratio was 2.1, indicating similar job market power as before the pandemic, with many workers having multiple job offers.
The labor leverage ratio, which measures who holds more power in the labor market by calculating the number of workers quitting their jobs versus those being fired, was 2.1 in March 2023. This figure indicates that workers had similar job market power as before the pandemic, with many having multiple job offers. Economist Aaron Sojourner introduced the term on Twitter in 2021, providing a new perspective on existing economic concepts. Despite its modest beginnings, the labor leverage ratio offers valuable insights into the current job market landscape. This indicator reflects the balance of power between employers and employees, providing context for wage negotiations, hiring trends, and overall economic conditions. The labor leverage ratio's significance lies in its ability to highlight the extent to which workers can exercise choice in the job market, ultimately influencing wages, working conditions, and labor force dynamics.
Power shift in labor market during pandemic: Workers hold more leverage in labor market, leading to higher wages for low-income workers, but not all quits are voluntary, and balance of power could shift back to employers as more people re-enter labor market. Economic policy plays a crucial role.
The power dynamics in the labor market have shifted significantly during the pandemic, with workers holding more leverage than before. This is evident in industries like retail and food service, where quit rates remain 50% higher than pre-pandemic levels. Aaron Sojourner, an economist at the University of Minnesota, explains that this power is likely to translate into higher wages for low-income workers. However, not all quits are voluntary, and some workers may have been forced to leave their jobs due to personal constraints. Employers have been reluctant to fire workers during the pandemic due to labor shortages, but the balance of power could shift back in their favor as more people re-enter the labor market. However, it's important to note that broad measures of quit and firing rates don't capture all complexities of the labor market, such as demographic differences. Therefore, economic policy plays a crucial role in shaping the balance of power between workers and employers.
Fed's Interest Rate Hikes Impacting Workers and Real Estate Market: The Fed's interest rate hikes have led to less wage growth and more layoffs for workers, but major legislation could boost demand for labor and potentially shift the power dynamic. Meanwhile, high interest rates make real estate assets more affordable, and Fundrise plans to expand its portfolio.
The Federal Reserve's efforts to cool the economy and bring down inflation through interest rate hikes have led to less wage growth and more layoffs for workers. However, major legislation such as the infrastructure bill, the inflation reduction act, and the CHIPS Act could boost demand for workers, particularly those without 4-year college degrees. This could be an important shift for workers whose labor market participation has declined for decades. The new Jobs Friday indicator provides a way to measure this newfound power for workers. This episode was produced by Brittany Cronin, engineered by Robert Rodriguez, fact-checked by Sarah Juarez, and edited by Katie Cannon. The Indicator is a production of NPR. Additionally, high interest rates have made real estate assets more affordable compared to previous valuations. The Fundrise flagship fund plans to expand its $1,000,000,000 real estate portfolio in the coming months. As always, it's important to carefully consider the investment objectives, risks, charges, and expenses of the fund before investing. Listeners can learn more and invest at fundrise.com/npr.
