The Real Cause Of Wage Stagnation - ft. Arin Dube

In this episode of Capitalisn't, host Arin Dube, professor of economics at the University of Massachusetts Amherst and author of *The Wage Standard*, challenges the long-standing economic narrative that rising productivity automatically leads to rising wages. He argues that the breakdown of this relationship since 1973—where productivity rose 72% but real wages only increased 9%—is due to monopsony power in labor markets. Unlike perfect competition, monopsony occurs when employers have significant wage-setting power due to frictions like job search costs, non-compete agreements, and geographic or occupational segmentation. Dube explains that these frictions are especially pronounced at the bottom of the wage distribution, where workers face higher barriers to mobility. He highlights how tight labor markets—such as those seen post-pandemic—can dramatically boost wages at the bottom, while slack markets enable low-wage firms to survive. The episode explores policy solutions, including stronger minimum wage enforcement, wage transparency, and broader wage standards, while addressing why political will remains limited despite strong empirical support for these reforms. Dube also discusses the role of fairness, institutional countervailing power, and the limitations of relying solely on market forces or macroeconomic policy.