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The myth of labor’s inequality of bargaining power

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Abstract

This paper argues that the widespread belief in labor’s exploitation and “underpayment” in a free market economy is illogical and lacks a serious empirical foundation. Theories of systematic disadvantage ignore the behavior of entrepreneurs under the profit-and-loss motive and the tendency for risk-adjusted rates of return to equalize. Labor has proven versatile and mobile in the U.S. economy, where technical progress also has been extraordinarily labor-saving. Nor have discrimination (when unaided by the public sector), fluctuations in unemployment, or formal collusions resulted in systematic underpricing of labor services.

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Authors and Affiliations

  1. Texas A&M University, 77843, College Station, TX

    Morgan O. Reynolds

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  1. Morgan O. Reynolds
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The author thanks John Allen and Donald Deere for their comments on an earlier draft of this paper. The usual caveat holds.

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Reynolds, M.O. The myth of labor’s inequality of bargaining power. Journal of Labor Research 12, 167–183 (1991). https://doi.org/10.1007/BF02685380

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