Winner-takes-all labor markets: neoliberalism and why we must refrain from it

김혜준 30809

A winner-takes-all labor market refers to an economy in which only the few best performers garner a great majority of the rewards, while the remaining competitors are left with very little. Art industries, show business, and the sports industry are representative examples of winner-takes-all labor markets. Many large companies follow this structure, too.

A junior football player may exhaust himself every day with work-outs and practice, pouring all his time and effort in football so that he doesn’t have any left for academics. If he’s skilled enough, he may become professional and turn rich, famous, beloved all over the nation and farther. If he’s not, he needs to look for another life. About 2.5 percent of college football players go to the NFL. Others can’t. A low-level employee may work overtime, spend less time with his family and friends, appealing himself so that he can be promoted. He may dream of being a CEO some day. Even if he holds an MBA, his odds are 1 in 135,000. If he succeeds, the ratio of his new pay and his old pay would be 271:1. The winner takes all, while the loser barely gains.

This is inherently a neo-liberalistic idea. It ignores, does not take the responsibility of the losers. It does not really care much about the winners, either. It does not care about people, but only their efficiency. Some might say efficiency is the only thing and economic system has to mind about. Perhaps this is true. But a winner-takes-all labor market fails even to calculate this correctly, as all ideas of neo-liberalism do.

What is widely known and easily explained as the American Dream, the chances of climbing to the top, success stories and stereotypically repeated songs of the underdogs, had hovered dominant and dazzling decades ago, creating and validating the structure. It is a natural phenomenon in the free market system. And, despite The Great Gatsby and the Invisible Man and countless other attacks, whether out of pure inertia and convenience or of other forces, it still stands. People still participate in the winner-takes-all labor market.

A winner-takes-all labor market certainly has its advantages. In an intense competition, everyone could benefit; people could work harder to get to the top, generating more profits and a more active economy. However, this market form can also generate great disparity between the rich and the non-rich. The proportion of affluent people in a society is getting smaller, and these 1 percent of men are growing astonishingly wealthy. This in itself might not deem as a concern. But what’s noteworthy is the other 99 percent, slowly suffocating in poverty. Wealth is polarizing.

What does this mean? It means the middle class is hollowing out. On average across OECD countries, the share of people in middle-income households, defined as households earning between 75% and 200% of the median national income, fell from 64% to 61% between the mid-1980s and mid-2010s. Overall, over the past 30 years, median incomes increased a third less than the average income of the richest 10%. In parallel, the cost of essential parts of the middle-class lifestyle have increased faster than inflation; house prices have been growing three times faster than household median income over the last two decades. This happened in the context of rising job insecurity in fast transforming, polarized labour markets.

The middle class are the most likely to bring intellectual improvement, innovation, and social mobility, given that the rich have no advantage in doing so and the lower class do not have enough opportunities. This economic influence and the middle class’s role as ‘center of economic gravity’ has weakened. It needs to be restored, for the long run.

When competition in the labor market grows intense, what happens to the workers? Or, more accurately, what will happen to us if competition gets too intense? Psychological issues may be one thing. A recent Gallup study of nearly 7,500 full-time employees found that 23 percent reported feeling burned out at work very often or always, while an additional 44 percent reported feeling burned out sometimes. Welfare is significant, and yet, judging by the enormous heaps of “healing books” about stress and anxiety and pressure that’s actually starting to outnumber the stacks of novels in Korean bookstores, not being sufficiently taken care of.

The free market system, and the infamous invisible hand of Adam Smith, is not unconditional. Monopolization, extreme egotism, immobilities, time lags, and other limits exist. This labor market system will not solve itself mystically and conveniently in the long run. Income polarization leads to inequality of wealth. This leads to a whole new array of problems, such as the inequality of opportunities for the children, social unrest, political volatility, lagging economic growth, and more. Newton’s first law of motion applies to human movement, too. The structure of the labor market and its effects could carry on and on and worsen and worsen, until change seems no more than a futile mirage and society near collapses.

We must address the problems that the winner-takes-all labor market causes. This form of labor market squeezes the middle class too much, results in too much inequality, and demands too much from people to function healthily in the long run. Natural phenomena of the free market does not mean magically sensible; we would be simultaneously overestimating rationality of human beings and underestimating our short-sighted selfishness when believing that. Government intervention, or perhaps some other measure, will have to happen, so that a more wholesome form of labor market is established.