EMBARGOED UNTIL 4:30 PM ET, DECEMBER 20, 2016
Increase wages, competition, and worker bargaining power
As the Council of Economic Advisers recently discussed in its report on labor market
monopsony,^72 there is growing concern about a general reduction in competition among firms for
workers and a commensurate shift in the balance of bargaining power toward employers. Market
concentration resulting from the development of AI has the potential to worsen these trends. A
displacement of workers from industries being disrupted by AI-driven automation would also
create slack in the labor market in the short to medium-run, which is likely to depress wages.
Fortunately, there are several approaches described below that can counterbalance these trends
and boost Americans’ wages and working conditions.
Raise the Minimum Wage
The minimum wage plays a critical role in reducing inequality, increasing consumption, and
strengthening the workforce. Raising it could lift at least 4.6 million people out of poverty.^73
Adjusted for inflation, the value of the minimum wage has fallen by nearly a quarter from its
peak value in 1968 and is about one-fifth less than it was when President Reagan took office.
While Congress has not acted, 22 states and the District of Columbia enacted legislation raising
their minimum wage since that time—including the direct passage of new increases by residents
of four states (Arizona, Colorado, Maine, and Washington) in the November 2016 elections.
Modernize Overtime and Spread Work
Offering overtime is one of the single most important steps to help grow middle-class wages and
spread jobs to more workers. In May 2016 , the Department of Labor finalized revisions to its
regulations that would extend overtime protections to 4.2 million more Americans and boost
wages for workers by $12 billion over the next decade.^74
Strengthen Unions, Worker Voice, and Bargaining Power
Growing and sustaining the middle class requires strong labor unions. Labor unions help to build
the middle class and have been critical in restoring the link between hard work and opportunity
so the benefits of economic growth can be more broadly shared.^75 Unions have been at the
forefront of establishing the 40-hour work week and the weekend, eliminating child labor laws,
and establishing fair benefits and decent wages. Policymakers should explore ways to empower
(^72) Council of Economic Advisers, “Issue Brief: Labor Market Monopsony: Trends, Consequences, and Policy
Responses,” October 2016
(https://www.whitehouse.gov/sites/default/files/page/files/20161025_monopsony_labor_mrkt_cea.pdf).
(^73) Arindrajit Dube, “Minimum Wages and the Distribution of Family Incomes,” 2014
(http://sites.utexas.edu/chasp/files/2015/04/MinimumWagesandDistributionofFamilyIncomes.pdf)
(^74) The White House, “Fact Sheet: Growing Middle Class Paychecks and Helping Working Families Get Ahead by
Expanding Overtime Pay,” Executive Office of the President, May 2016 (https://www.whitehouse.gov/the-press-
office/2016/05/17/fact-sheet-growing-middle-class-paychecks-and-helping-working-families- 0 ). This rule was
challenged in court and is currently subject to an injunction.
(^75) Council of Economic Advisers, “Issue Brief: Worker Voice in a Time of Rising Inequality,” October 2015
(https://www.whitehouse.gov/sites/default/files/page/files/cea_worker_voice_issue_brief.pdf).