Hafiz: The Law of Geographic Labor Market Inequality
In The Law of Geographic Labor Market Inequality, Hiba Hafiz (Boston College Law) explores how law shapes the relationship between employer power and geographic inequality. Hafiz challenges the spatial equilibrium hypothesis, a view that market forces will correct geographic divergence, by examining empirical evidence and federal regulation of the labor market.
Rural labor markets present unique regulatory challenges. Like other distressed labor markets, rural labor markets have significant market thinness, meaning there are few employers and/or workers, creating a lower volume of transactions. As a result, a small shift in demand can significantly impact the whole labor market. With this kind of instability, employers’ power strengthens over the terms and conditions of work prior to and during employment. This disadvantages rural and other distressed communities by leading to lower average earnings, higher poverty rates, and worse health outcomes.
The article identifies the ways federal employment policy, antitrust, labor, and employment law have failed to tackle the sources of employer power and facilitated this market at the workers’ expense. Hafiz begins by examining monetary policies’ contribution to geographic inequality. For example, the “Volcker Shock” policy instituted during the Carter administration led to a dramatic increase in interest rates, allowing reduced inflation through the Reagan administration and triggering the largest recession since the Great Depression.
Next, Hafiz examines antitrust regulations’ failure to sufficiently challenge employers’ monopsony, a market structure in which a single buyer controls the market resulting in anticompetitive conduct. Finally, Hafiz looks at failures of labor law. For example, Hafiz addresses the National Labor Relations Act (NLRA), which categorically exempts many workers critical to production and service provisions in rural and distressed communities. Labor laws target large, industrial workplaces with a massive workforce. This creates deficiencies in the law’s ability to regulate smaller, dispersed employers, resulting in underenforcement in rural and distressed communities.
Finally, Hafiz offers regulatory solutions to improving rural and distressed labor markets. One solution for employer monopsonies is public ownership, which would allow wealth to be better redistributed and prevent further geographic inequalities. Further, federal action can help in combating employer monopsony and creating employment, antitrust, and labor law reforms. Hafiz hopes that a broad discussion of economic governance and market-creating mechanisms will help policymakers imagine alternative ways to structure rural and distressed labor markets.
