Pricing Transparency Is Not Quite As Popular As Market Failure
For as long as I can remember, I’ve felt myself to be at a disadvantage when it comes to finding good jobs. Employers have better data. They often have empirical data to determine how much to pay for a job. They have salary consultants to help them figure how much to pay someone, though I recall that Warren Buffet once said, “If you need a salary consultant, you don’t know what you’re doing.” And the largest companies in the world have leverage with the government to keep wages low, here I think of Walmart.
An interesting natural experiment is underway right now, right under our noses. The state of Colorado passed a law that has only recently gone into effect. Their new law says that for all new job listings in their state, the listing must include the hourly rate or, a full salary range and benefits. Once that law came into effect, the behavior of some of the biggest American companies came into clear view. I learned about this first from vice.com. They ran an article with the following headline and subheader:
Why Corporations Won’t Hire Remote Workers in Colorado
In response to a Colorado state law that requires employers post salary ranges in job postings, companies are simply refusing to consider applicants from the state.
Right away, I could feel my temperature go up. So I read the article, and found the nugget here:
Why is this happening? Seemingly because of job listing requirements tied to the Equal Pay for Equal Work Act, a Colorado law signed in 2019 but that went into effect at the start of this year, in part requires all employers to immediately notify current employees of “promotional opportunities,” provide a salary range and description of benefits on a job listing, as well as maintain records of job descriptions and compensation history for every employee. As part of this, regulators in Colorado decided that “An employer is required to ‘disclose in each posting for each job the hourly or salary compensation, or a range of hourly or the salary compensation, and a general description of all of the benefits and other compensation to be offered to the hired applicant.’” They also instituted rules about notifying current employees about promotion opportunities as part of new job postings.
This is a huge development. Colorado seems to be making an honest effort to make their state a great place to work and it shows. They’re offering employers a great place to set up shop, but some employers are gamey about wages and benefits. So when employers list remote work opportunities for hire, they specifically exclude Colorado as if to say, “Dude, you’re breaking our business model. We need to keep prospective employees in the dark about wages so that the CEO and the board of directors can keep their massive haul every year. Without complaints.”
This kind of behavior involves “interstate commerce” so I don’t think it will be long before Congress takes notice of what is happening. Congress has jurisdiction over matters that cross state lines and it would seem that remote work is one of them. Our economy is undergoing a transformation post COVID. Anyone and everyone who has been engaged in remote work even part-time have realized that they could work full time from home. And many of them have realized that they could move to states with a lower cost of living if the infrastructure was there.
There is something else going on in Colorado. For many years now, cities and small towns in Colorado have been working hard to build their own community broadband networks. That state is one of many that has incumbent ISPs that have delivered poor service at expensive rates. A law in Colorado permits local jurisdictions like towns and counties to opt out of a rule that denies them a better alternative to the service provided by the incumbent ISPs. Christopher Mitchell at Community Broadband Networks has been tracking this trend and their latest article about it has this to say:
Over 140 municipalities in Colorado have opted out of a state law (SB-152) that prevents local governments from investing in broadband infrastructure. With overwhelming support from voters on Election Day last month, Denver, Berthoud, and Englewood became the most recent Colorado communities to bail on SB-152 in the 15 years since Qwest (now CenturyLink) and Comcast successfully lobbied for passage of the anti-local authority bill designed to protect their profits.
That means over time, Colorado is likely to become a great place for remote work. Customers on some community broadband networks in Colorado are finding that a gig (as in “a gigabit”) service up and down, can be had for a very reasonable $75 a month with no data cap. A connection like that makes remote work a breeze.
I know because I have a gigabit connection, up and down from Utopia Fiber, a community broadband service in Salt Lake valley and I’m only paying $80 a month for that service now. I’ve had it for 3 years now and I have never seen my rates go up. I never have to talk to the “customer retention department” because there is no other service from Comcast or CenturyLink that I want to buy. I have a 10 terabyte monthly soft data cap that I don’t even come close to touching (497 GB last month), so there is really no data cap. And my service is rock solid. I don’t have to think about it. My fiber connection saved my job from the pandemic, so I never stopped working.
Now they could have a fast connection in Colorado that is ideal for remote work, but then they have this new law that requires employers hiring there to be transparent about wages and benefits, but some of them won’t. In other words, employers would rather keep you guessing about how much you’ll be paid until you can actually land an offer, but municipal broadband networks are being very transparent about pricing. Where is the market failure?
Maybe I missed something, but the last I heard, free markets require pricing transparency. A market is free when pricing information is easily available. For example, shoppers know where to find cheap gas. They can go to gasbuddy.com and figure out where the cheap gas can be found. It’s interesting to note that in most regions, there isn’t much difference in gasoline quality among retailers, and pricing transparency might have something to do with that. There are often only one or two refineries that serve a region and that means the quality of gas won’t differ much among sellers. But their pricing is transparent.
When we shop for anything online, we can easily find competitive pricing. There are search engines dedicated to pricing anything we want from housing to eyeglass cases. It doesn’t really matter. But apparently, there are some employers who would rather keep us in the dark about wages and benefits, never really knowing what other people are being paid for a job. There is kind of a word for that. Monopsony.
Monopsony is a little different than monopoly. Monopsony is where one or two buyers have so much buying power, that they can set prices. That lack of transparency in labor pricing helps to support monopsony among one or more employers.
We’re more familiar with monopoly because we see that often with broadband service. Most Americans have access to one or two internet service providers and no more. We know that when we have only one internet service provider to choose from, we have been captured by a monopoly. Those cities and towns in Colorado that want to or have already built their broadband networks are doing so in response to a market failure, a monopoly on internet access.
Notice the situation in Colorado. They have a new law that requires pricing transparency in the labor market. Many employers are doing the same thing, denying jobs to people who happen to live in Colorado because of a law requiring pricing transparency. When employers coordinate on pricing, as they are doing here, they are creating a monopsony, a united front to deny employees a fair price for their labor.
What can we do about this? I’m not really sure. I think, for now, the best thing to do is to bring this kind of behavior to the attention of our representatives and government agencies that can do something about it. It’s a knotty problem that will take time to sort. But what Colorado is doing makes sense. They are bringing transparency to labor pricing in their state and that is something that our country needs.
We want women and men to earn the same pay for the same work as men. We want people to earn the same money for the same work regardless of their skin color, their religion, or their sexual identity. The only thing that should matter here is whether prospective employees have the skills to do the job or not. And there is no reason that employees should have to guess at what a job will pay until they get an offer. It’s a guessing game that we’ll never win, that’s why the state of Colorado decided to step in.