The Federal Trade Commission under Chair Andrew Ferguson has surprised many by continuing its predecessor’s emphasis on protecting labor markets. Randy Kim writes that while this is a welcome development, it will do little to help workers if President Donald Trump does not also continue his predecessor’s whole-of-government approach. Early indications suggest he will not.
To the surprise of many, the Federal Trade Commission under the new Trump administration has elected to continue, and even extend, some of the previous administration’s most significant policies and initiatives. For example, the Biden administration’s FTC addressed what it perceived as lax merger enforcement by issuing revised merger guidelines in 2023 that many in the private sector criticized as onerous. Contrary to what some expected would be a laxer stance from a pro-business Republican administration, Trump’s FTC chair Andrew Ferguson announced within two months of his appointment that the stricter Biden merger guidelines would remain in place.
One week after announcing the retention of the Biden merger guidelines, Ferguson issued a directive announcing the creation of an intra-agency “Joint Labor Task Force” tasked with investigating and prosecuting anticompetitive labor market conduct. While limited to the FTC, the directive is reminiscent of a 2021 Executive Order from Biden calling for a “whole-of-government effort to promote competition in the American economy,” which resulted in an unprecedented focus on labor markets.
Namely, in response to the executive order, the Treasury Department issued a report in 2022 on “The State of Labor Market Competition” in consultation with the Department of Justice, the Department of Labor, and the FTC. The FTC and DOJ Antitrust Division also attempted to ban non-compete employment agreements and prosecute antitrust harms like wage-fixing and collusive “no poach” agreements with varied success.
Ferguson’s continuation of former FTC Chair Lina Khan’s emphasis on labor markets is welcome but cannot reverse by itself the half-century-long stagnation of wage growth for low-income U.S. workers. If this is to be accomplished, the Trump administration will have to continue its predecessor’s whole-of-government approach. There is little sign yet this will be the case.
Antitrust can’t save low-wage workers
Prior to the Biden administration, the antitrust agencies and courts neglected anticompetitive labor market practices. While it is difficult to measure the aggregate economic effect of these abuses, we can infer their plausible negative economic impacts. For example, when an employer controls an entire geographic labor market, like a company town, they are a “monopsonist” that can lower wages or neglect working conditions because workers have no alternatives. Collusive no-poach agreements between labor market competitors not to hire one another’s workers similarly reduce worker bargaining power by limiting their exit options. Onerous non-compete clauses can also limit worker mobility, stifle potential innovation, and hamper new business creation. Lastly, agreements among competitors not to raise wages suppresses them below their competitive level. Thus increased agency enforcement efforts against these harms are warranted.
However, in isolation, increased enforcement of antitrust laws in labor markets is unlikely to result in significant improvements to stagnating wages, particularly for American workers employed in low-wage occupations.
Firstly, many studies have investigated if employer market concentration in the United States correlates with secular wage trends. These studies have produced varying conclusions on both how much market concentration really exists and how strongly said concentration correlates with low wages. Some studies find that local-level employer concentration, especially in densely populated urban areas, has trended downward. This led the Treasury Department to conclude in its 2022 report that “labor market concentration is a flawed proxy for labor market power.”
In other words, while evidence suggests that labor market concentration correlates to lower wages, the impact on wage suppression in the aggregate may be negligible because the prevalence of concentration is in lesser populated areas, while the average worker lives in more densely populated areas with lower levels of concentration. For example, one study found low labor supply elasticities (workers not leaving jobs when wages are cut), yet the average employer market share was only nine percent. Employers appear to have wage-setting power even in putatively “thicker” markets where the number of firms should be competing wages up.
Instead, wage stagnation is more likely the result of market failures inherent to labor markets that preference employers even without the presence of monopsony power or explicit anti-competitive conduct. These failures include a variety of labor market characteristics such as commute times, which critically determine workers’ job choice and reduce the geographic limits of labor markets. Worker preferences further differentiate every potential job offer across a myriad of tangible and intangible employer attributes, from healthcare benefits and retirement plan contributions to whether a worker has good rapport with their supervisor or enjoys nearby lunch eateries. Labor market “matching” is further constrained by employer preferences for worker attributes. Everything from educational background and work experience to racial, gender, sexuality, or even sports team affinities can play to employers’ biases.
There are also informational barriers for workers looking to move jobs. While consumers have access to a wealth of information, like regulated product labeling and online reviews, many important job attributes like workplace culture are difficult to discover without plying unreliable social networks and enduring months of sunk costs associated with researching, applying, interviewing, and changing jobs. On the other side of the labor market, employers have human resources departments, keep records of employee work history, and have more resources to understand worker exit options, giving them an informational advantage over workers and applicants.
In a hypothetical perfectly competitive labor market, a firm that lowers wages any amount below their competitive level should promptly lose 100% of their workforce to competing employers. Because of these market frictions, an employer can realize labor savings even in competitive labor markets since employment is “sticky” and not all workers will leave instantly.
Wage stagnation is the result of political failure to protect workers
Thus, in the absence of political intervention or countervailing power, like union activity and the political will to protect it, most workers are structurally disadvantaged. Yet, as the Economic Policy Institute (EPI) has extensively documented and measured, the political support for worker protections has eroded for decades and accounts for most U.S. wage stagnation.
The EPI estimates that many public policy choices and outcomes unrelated to anticompetitive labor market abuses, like the collapse in value of the minimum wage, collapse of political support for and membership in unions, elevated and sustained unemployment targets by the Federal Reserve to limit inflation, global trade agreements, outsourcing, and other unregulated economic developments can explain more than 75% of the divergence between U.S. worker productivity and wages from 1979, when average wages began to significantly decouple from worker productivity, to 2017.
At the bottom of the income maldistribution, low-wage workers are simultaneously least affected by employer concentration and anticompetitive restraints and most harmed by the political retreat from pro-labor protections.
For example, while an experienced antitrust attorney might face difficulty becoming a labor attorney at a firm across the street and enormous entry barriers to becoming a neurosurgeon, a grocery cashier may face fewer obstacles becoming a bookstore cashier, barista, or motel concierge because lower-wage workers are less specialized and therefore have more mobility. Lower-wage workers also tend to be concentrated in denser populated urban labor markets that have relatively more job openings and more employers in closer proximity to one another.
Instead, these workers are comparatively harmed more by policy failures like the erosion of minimum wages, which the EPI has estimated accounts for nearly the entire growth of the gap between the lower tenth of income earners and the median wage over the last several decades. They are also more harmed by macroeconomic policies such as elevated interest rates that increase unemployment. These policies offset these workers’ comparative employment mobility with competition from a glut of desperate unemployed workers willing to accept less because of reduced bargaining power in a slack labor market. Finally, the EPI has found that low-wage workers also suffer more from employer-preferencing global trade agreements with low-income nations, under-enforcement of wage theft, lack of protections from labor outsourcing that often targets less specialized occupations, and lack of protection from employer-imposed mandatory arbitration clauses that limit judicial remedies.
Ferguson for labor, Trump against
Thus, Ferguson’s Joint Labor Task Force is unlikely to improve aggregate worker welfare without support from the rest of the Trump government. That is unlikely given initiatives these other agencies took during the first Trump administration, which include rolling back overtime pay eligibility, limiting “joint employer status” in labor disputes that allowed union organizers to hold parent companies responsible for labor violations, reversing the Department of Labor’s “persuader rule” that required employers to disclose the hiring of anti-union consultants, and generous interpretations of “independent contractor” status that allow employers to misclassify employees and deny them legal rights, protections, and employment benefits.
While still early into Trump’s second term, his agenda does not seem much changed. For example, Trump’s acting general counsel for the National Labor Relations Board, William Cowen, released a memo in February signaling the Board’s intent to overturn the Biden-era prohibition on captive-audience meetings where employers can force employees to attend antiunion meetings. The memo also signaled the intent to cap damages for victims of unfair labor practices and not prosecute non-compete agreements, in direct contradiction to the concern over these worker-mobility-limiting clauses expressed in Ferguson’s memo.
The Trump administration has touted its sweeping tariff proposals as a win for U.S. workers that will boost domestic manufacturing and protect jobs. However, without a corresponding industrial investment strategy, like Biden’s Infrastructure and Investment and Jobs Act to direct investment into manufacturing job creation, many economists believe the tariff benefits for workers in the favored sectors will be more than offset by contraction in multiple industries facing higher input costs and lower demand for their exports by retaliating countries, resulting in reduced employment and higher consumer costs. Low-wage workers would again suffer the most. Not only does inflation impact their income the hardest, but they have the least financial ability to wait for a potential American re-industrialization that requires the recovery of productive capacity, industrial infrastructure, and labor re-training, all of which could take years.
Rather than boost labor, the overwhelming disposition of the Trump administration’s policies toward labor aligns with the an agenda of empowering capital by dismantling the regulatory and welfare state and regressively reducing the tax burden on the wealthiest Americans. The consequence of these actions will further exacerbate inequality by transferring wealth from the working class to the investor class and drive down wages by concentrating wealth into the hands of the most affluent Americans with the lowest marginal propensity to consume—reducing the consumer demand that drives employment and wages. Increased labor market antitrust enforcement efforts to any degree are welcome, but their impact will be minimal at the aggregate level if the Trump administration does not continue its predecessor’s whole-of-government approach, and certainly not if the rest of the government actively mobilizes against labor.
Author’s Disclosures: The authors report no conflicts of interest. You can read our disclosure policy here.
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