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Bargaining Power, COVID-19, and the Essential Economy Prepared By ANALYSIS 02 DECEMBER, 2020 Bargaining Power, COVID-19, and the Essential Economy Prepared by John Leer INTRODUCTION [email protected] Economist for Morning Consult The COVID-19 pandemic has precipitated an unprecedented health and economic crisis, Dante DeAntonio creating extraordinary challenges for households and businesses. A critical question is how [email protected] this may be changing how Americans make important economic decisions. Morning Consult Senior Economist and Moody’s Analytics have teamed up, conducting an in-depth survey of 5,000 adults in mid- Bernard Yaros September, to examine how the pandemic is impacting decisions over household finances, [email protected] parenting, starting a business, wage bargaining, and moving. Assistant Director and Economist Ryan Sweet [email protected] Senior Director Cristian deRitis [email protected] Senior Director and Deputy Chief Economist Mark Zandi [email protected] Chief Economist Contact Us Email [email protected] U.S./Canada +1.866.275.3266 EMEA +44.20.7772.5454 (London) +420.224.222.929 (Prague) Asia/Pacific +852.3551.3077 All Others +1.610.235.5299 Web www.economy.com www.moodysanalytics.com MOODY’S ANALYTICS BARGAINING POWER, COVID-19, AND THE ESSENTIAL ECONOMY 1 Bargaining Power, COVID-19, and the Essential Economy BY JOHN LEER, DANTE DEANTONIO, BERNARD YAROS, RYAN SWEET, CRISTIAN DERITIS AND MARK ZANDI he COVID-19 pandemic has precipitated an unprecedented health and economic crisis, creating extraordinary challenges for households and businesses. A critical question is how this may be changing how Americans make important economic decisions. Morning Consult and Moody’s Analytics have teamed T 1 up, conducting an in-depth survey of 5,000 adults in mid-September, to examine how the pandemic is impacting decisions over household finances, parenting, starting a business, wage bargaining, and moving. In this paper, we explore the bargaining » The striking and persistent difference point increase in the share of essential power of workers in the age of COVID-19 between the willingness of men and workers who are comfortable asking and the role that essential workers have women to ask for pay increases makes for a raise is associated with a 1.3-per- played in the employer-employee rela- it even more difficult to address centage point gain in the share of es- tionship during the pandemic. The key and eliminate the gender disparity sential workers who got a raise during findings are: in wages. the pandemic. » The pandemic exerted moderate downward pressure on workers’ » There is a strong generational divide Wage bargaining matters willingness to bargain with their em- in the willingness to bargain with em- Workers’ willingness to bargain with ployers in aggregate, and particularly ployers. Older workers are less likely their employers is a critical indicator of on low-income and less well-edu- to have asked for increases in pay, and their total bargaining power since it both cated workers who disproportion- they remain less willing to do so in reflects and influences bargaining power.2 ately experienced a loss of pay or light of the pandemic. Understanding the strength of workers’ income during the pandemic. At the bargaining power sheds light on the paths other end of the spectrum, highly » Just over half of surveyed adults of employment and income outcomes as educated workers have grown more self-identified as essential workers. the economy experiences and ultimately willing to bargain with their employ- Men were significantly more likely to recovers from the coronavirus pandemic. ers, providing additional evidence consider themselves essential than Workers’ bargaining power impacts the of the inelasticity of demand for women. The gender gap is the least economy through three primary channels. high-skilled labor. pronounced in healthcare, which is First, a decrease in workers’ bargaining intuitive since this is a health crisis first power slows wage growth since a greater » Wage growth during the next business and foremost, but it widens in other share of gains in productivity go to firms cycle is likely to follow the same path industries where it may not be as clear rather than workers. Over the past 40 of the prior business cycle, with wage what constitutes essential work. years, this phenomenon contributed to the pressures at the low end of the income spectrum remaining subdued well into » Nearly one-third of essential workers 2 The other critical component is workers’ ability to bargain the recovery. received a pay raise because of the risk with employers, which is a function of industry concentra- they have taken during the pandemic. tion, the elasticity of the supply of labor, and employment laws and regulations. These three factors tend to evolve 1 A detailed description of the survey methodology and com- The more comfortable essential work- more slowly over time, meaning that it will take more time position can be found in the appendix of the first paper in ers are in asking for a raise, the more for them to impact workers’ bargaining power. Thus, work- this series, “Struggling Through: Household Finances in the ers’ willingness to bargain with their employers is a better Pandemic,” which can be found at: https://www.moodysan- likely they were to have received a pay indicator of the near-term impact of the pandemic on work- alytics.com/microsites/pandemic-economics raise. Specifically, a 10-percentage ers’ bargaining power. MOODY’S ANALYTICS BARGAINING POWER, COVID-19, AND THE ESSENTIAL ECONOMY 2 Chart 1: Bargaining Power Varies Chart 2: Wide Gap Amid Men and Women % of respondents who have asked for raise from current employer % of respondents who have asked for raise from current employer Overall Ethnicity: White, Male Gender: Male Ethnicity: White, Female Gender: Female Ethnicity: Black, Male Age: 18-34 Ethnicity: Black, Female Ethnicity: Hispanic, Male Age: 35-44 Ethnicity: Hispanic, Female Age: 45-64 Educ: < College, Male Age: 65+ Educ: < College, Female Educ: < College Educ: College +, Male Overall Educ: Bachelor's degree Educ: College +, Female avg Educ: Post-grad Income: Under 50k, Male Ethnicity: White Income: Under 50k, Female Ethnicity: Hispanic Income: 50k-100k, Male Ethnicity: Black Income: 50k-100k, Female Income: 100k+, Male Ethnicity: Other Income: 100k+, Female 0 5 10 15 20 25 30 35 40 0 5 10 15 20 25 30 35 40 45 50 Sources: Morning Consult, Moody’s Analytics Sources: Morning Consult, Moody’s Analytics Presentation Title, Date 1 Presentation Title, Date 2 relatively sluggish growth in real wages in Given the challenges facing American work- for the enduring gender pay gap in the U.S. the U.S. even after accounting for the slow- ers, one might expect them to feel grateful workforce.7 down in productivity.3 Second, disparities that they still have a job and less likely to The survey confirms just how striking in workers’ willingness to engage in wage ask for raises, promotions, or other forms and persistent the differences between men and benefit bargaining across demographic of compensation. and women are in terms of bargaining in the or employment groups drive differences On the other hand, many workers are workforce. Across all major demographic in pay across these groups. In particular, being asked by their employers to per- groups, women are far less likely to ask for a women and minorities tend to be less will- form heroic tasks. Parents are struggling raise from their employer (see Chart 2). Even ing to engage in bargaining and less aware to balance their jobs with their additional highly educated, high-income women—who of the unwritten norms around bargaining, child-care responsibilities, and essential would be expected to have more bargaining thereby contributing to gender and racial workers accepted additional health risks to power—are less likely to have asked for a wage gaps.4 Third, when workers’ bargain- deliver critical services. Prior to the pan- raise than any cohort of men. It is natural to ing power decreases, wages tend to be less demic, economic conditions had started to believe that some of this gap may be driven responsive to changes in unemployment, favor workers. There were signs that even by differences in the industry and occupa- which flattens the Phillips curve and raises low-income workers were finally starting tional composition of men and women in the additional challenges for central banks.5 to benefit from the tight labor market, as workforce. However, the survey data confirm The effect of the coronavirus pandemic evidenced by low unemployment and rising that even within specific industries, men are on workers’ willingness to bargain with em- wages. Given these two competing sets of still almost always more likely to engage in ployers is not ex ante clear. On the one hand, forces, this paper directly measures these bargaining (see Chart 3). Similar patterns the coronavirus pandemic has harmed Amer- effects and analyzes their implications for emerge across the other bargaining metrics icans’ finances, challenged parents’ careers, the U.S. economy. evaluated—willingness to negotiate starting and forced many small businesses to close.6 salary and willingness to ask for a promotion. Who has bargaining power? When taken in combination, these represent 3 J. Bivens and H. Shierholz, “What labor market chang- The ability and willingness of workers to a significant headwind against women closing es have generated inequality and wage suppression?”, advocate for themselves with their employ- the pay gap. Economic Policy Institute, December 12, 2018, https:// www.epi.org/publication/what-labor-market-chang- ers has important implications for personal Noticeable differences also arise across es-have-generated-inequality-and-wage-suppression-em- gain and overall equity. Systematic differ- other demographic groups. Younger work- ployer-power-is-significant-but-largely-constant-where- as-workers-power-has-been-eroded-by-policy-actions.
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