President Joe Biden recently issued a sweeping executive order calling for 72 new actions by the federal government aimed at increasing market competition and strengthening antitrust enforcement.
In announcing his executive order, President Biden made it clear he was seeking to change the rules by which the U.S. economy operates: “We’re now 40 years into the experiment of letting giant corporations accumulate more and more power. I believe the experiment failed.”
To illuminate some of the potential consequences and implications of Biden’s executive order, the Penn Program on Regulation organized a panel discussion with three of Penn’s leading scholars of antitrust law and policy: Herbert Hovenkamp, the James G. Dinan Professor at the University of Pennsylvania Carey Law School and the Wharton School; Jonathan Klick, law professor at Penn Law; and Ioana Marinescu, associate professor at the School of Social Policy and Practice.
The session was moderated by Cary Coglianese, the Edward B. Shils Professor of Law and professor of political science and director of the Penn Program on Regulation.
A key concern underlying the President’s executive order is the belief that most workers have not reaped the full rewards of America’s economic prosperity in recent decades. As Hovenkamp summarized at the start of the panel, despite the extraordinary earnings of many large U.S. firms, data show that “the share of labor in this growing profitability has actually gotten smaller and smaller, so that the welfare of labor has gone down.”
Part of the problem, Marinescu explained in more detail, is that the majority of U.S. labor markets “are plagued by a low level of competition”—meaning, there are relatively few employers competing to hire workers. This lack of competition leads to low wages.
“Employers have the power to pay workers less than their productivity, because workers … have little opportunity to go to other jobs and so are willing to accept being paid less.” And research by Marinescu and Hovenkamp suggests that a spate of corporate mergers in recent decades, by further reducing the number of firms hiring workers, only serves to exacerbate this problem. The executive order, by calling for beefed-up antitrust enforcement, therefore could yield economic benefits for workers.
“The President is seizing on the moment here to have an instrument in antitrust policy that has a chance to increase wages,” Marinescu said.
This story is by Andrew Coopersmith. Read more on Penn Program for Regulation.