Economic Momentum as Country Recovers from COVID
Today, the President is building on economic momentum by signing an Executive Order to promote competition in the American economy, which will lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.
For decades, corporate consolidation has been accelerating. In over 75% of U.S. industries, a smaller number of large companies now control more of the business than they did twenty years ago. This is true across healthcare, financial services, agriculture and more.
This is evident in many industries, factually proven in healthcare staffing specifically.
That lack of competition drives up prices for consumers. As fewer large players have controlled more of the market, mark-ups (charges over cost) have tripled. Families are paying higher prices for necessities—things like prescription drugs, hearing aids, and internet service.
Are you surprised healthcare costs were not blatantly mentioned until the bottom of the order?
Barriers to competition are also driving down wages for workers. When there are only a few employers in town, workers have less opportunity to bargain for a higher wage and to demand dignity and respect in the workplace. In fact, research shows that industry consolidation is decreasing advertised wages by as much as 17%. Tens of millions of Americans—including those working in construction and retail—are required to sign non-compete agreements as a condition of getting a job, which makes it harder for them to switch to better-paying options.
With all the legislative turmoil surrounding this, especially in the nurse staffing industry, it would be wise to limit your use of non-competes. Instead, reap the benefits that come from the human side of business. Foster communication and empathy with your employees, you'll see a valuable return that is certainly measurable over time (lower turnover, increased referrals, more client business).
In total, higher prices and lower wages caused by lack of competition are now estimated to cost the median American household $5,000 per year.
Inadequate competition holds back economic growth and innovation. The rate of new business formation has fallen by almost 50% since the 1970s as large businesses make it harder for Americans with good ideas to break into markets. There are fewer opportunities for existing small and independent businesses to access markets and earn a fair return. Economists find that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth, and racial inequality widen.
When past presidents faced similar threats from growing corporate power, they took bold action. In the early 1900s, Teddy Roosevelt’s Administration broke up the trusts controlling the economy—Standard Oil, J.P. Morgan’s railroads, and others—giving the little guy a fighting chance. In the late 1930s, FDR’s Administration supercharged antitrust enforcement, increasing more than eightfold the number of cases brought in just two years—enforcement actions that saved consumers billions in today’s dollars and helped unleash decades of sustained, inclusive economic growth.
Today President Biden is taking decisive action to reduce the trend of corporate consolidation, increase competition, and deliver concrete benefits to America’s consumers, workers, farmers, and small businesses. Today’s historic Executive Order established a whole-of-government effort to promote competition in the American economy. The Order includes 72 initiatives by more than a dozen federal agencies to promptly tackle some of the most pressing competition problems across our economy. Once implemented, these initiatives will result in concrete improvements to people’s lives.
Among other things, they will:
- Make it easier to change jobs and help raise wages by banning or limiting non-compete agreements and unnecessary, cumbersome occupational licensing requirements that impede economic mobility.
- Lower prescription drug prices by supporting state and tribal programs that will import safe and cheaper drugs from Canada.
- Save Americans with hearing loss thousands of dollars by allowing hearing aids to be sold over the counter at drug stores.
- Save Americans money on their internet bills by banning excessive early termination fees, requiring clear disclosure of plan costs to facilitate comparison shopping, and ending landlord exclusivity arrangements that stick tenants with only a single internet option.
- Make it easier for people to get refunds from airlines and to comparison shop for flights by requiring clear upfront disclosure of add-on fees.
- Make it easier and cheaper to repair items you own by limiting manufacturers from barring self-repairs or third-party repairs of their products.
- Make it easier and cheaper to switch banks by requiring banks to allow customers to take their financial transaction data with them to a competitor.
- Empower family farmers and increase their incomes by strengthening the Department of Agriculture’s tools to stop the abusive practices of some meat processors.
- Increase opportunities for small businesses by directing all federal agencies to promote greater competition through their procurement and spending decisions.
The Order also encourages the leading antitrust agencies to focus enforcement efforts on problems in key markets and coordinates other agencies’ ongoing response to corporate consolidation. The Order:
- Calls on the leading antitrust agencies, the Department of Justice (DOJ) and Federal Trade Commission (FTC), to enforce the antitrust laws vigorously and recognizes that the law allows them to challenge prior bad mergers that past Administrations did not previously challenge.
- Announces a policy that enforcement should focus in particular on labor markets, agricultural markets, healthcare markets (which includes prescription drugs, hospital consolidation, and insurance), and the tech sector.
- Establishes a White House Competition Council, led by the Director of the National Economic Council, to monitor progress on finalizing the initiatives in the Order and to coordinate the federal government’s response to the rising power of large corporations in the economy.
A more detailed summary of the key actions in the Order is provided below:
Competition in labor markets empowers workers to demand higher wages and greater dignity and respect in the workplace. One way companies stifle competition is with non-compete clauses. Roughly half of private-sector businesses require at least some employees to enter non-compete agreements, affecting some 36 to 60 million workers.
Overly burdensome occupational licensing requirements that impede worker mobility and suppress wages also restrict competition. Today, almost 30% of jobs in the United States require a license, up from less than 5% in the 1950s. Fewer than 5% of occupations that require licensing in at least one state are treated consistently across all 50 states. That locks some people out of jobs, and it makes it harder for people to move between states—particularly burdening military spouses, 34% of whom work in a field requiring a license and are subject to military-directed moves every few years.
Workers may also be harmed by existing guidance provided by the Department of Justice and Federal Trade Commission to Human Resource personnel that allows third parties to make wage data available to employers—and not to workers—in certain circumstances without triggering antitrust scrutiny. This may be used to collaborate to suppress wages and benefits.
In the Order, the President:
- Encourages the FTC to ban or limit non-compete agreements.
- Encourages the FTC to ban unnecessary occupational licensing restrictions that impede economic mobility.
- Encourages the FTC and DOJ to strengthen antitrust guidance to prevent employers from collaborating to suppress wages or reduce benefits by sharing wage and benefit information with one another.
These actions complement the President’s call for Congress to pass the Protecting the Right to Organize (PRO) Act to ensure workers have a free and fair choice to join a union and to collectively bargain. Unions are critical to empowering workers to bargain with their employers for better jobs and to creating an economy that works for everyone.
The proposed Order tackles four areas where lack of competition in healthcare increases prices and reduces access to quality care.
Prescription Drugs: Americans pay more than 2.5 times as much for the same prescription drugs as peer countries, and sometimes much more. Price increases continue to far surpass inflation. As a result, nearly one in four Americans report difficulties paying for medication, and nearly one in three Americans report not taking their medications as prescribed.
These high prices are in part the result of lack of competition among drug manufacturers. The largest pharmaceutical companies are able to wield their market power to reap average annual profits of 15-20%, as compared to average annual profits of 4-9% for the largest non-drug companies.
One strategy that drug manufacturers have used to avoid competing is “pay for delay” agreements, in which brand-name drug manufacturers pay generic manufacturers to stay out of the market. That has raised drug prices by $3.5 billion per year, and research also shows that “pay for delay” and similar deals between generic and brand name manufacturers reduce innovation—reducing new drug trials and R&D expenditures.
In the Order, the President:
- Directs the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003.
- Directs the Health and Human Services Administration (HHS) to increase support for generic and biosimilar drugs, which provide low-cost options for patients.
- Directs HHS to issue a comprehensive plan within 45 days to combat high prescription drug prices and price gouging.
- Encourages the FTC to ban “pay for delay” and similar agreements by rule.
Hearing Aids: Hearing aids are so expensive that only 14% of the approximately 48 million Americans with hearing loss use them. On average, they cost more than $5,000 per pair, and those costs are often not covered by health insurance. A major driver of the expense is that consumers must get them from a doctor or a specialist, even though experts agree that medical evaluation is not necessary. Rather, this requirement serves only as red tape and a barrier to more companies selling hearing aids. The four largest hearing aid manufacturers now control 84% of the market.
In 2017, Congress passed a bipartisan proposal to allow hearing aids to be sold over the counter. However, the Trump Administration Food and Drug Administration failed to issue the necessary rules that would actually allow hearing aids to be sold over the counter, leaving millions of Americans without low-cost options.
In the Order, the President:
- Directs HHS to consider issuing proposed rules within 120 days for allowing hearing aids to be sold over the counter.
Hospitals: Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service. Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 138 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.
In the Order, the President:
- Underscores that hospital mergers can be harmful to patients and encourages the Justice Department and FTC to review and revise their merger guidelines to ensure patients are not harmed by such mergers.
Have you asked an HCA nurse how they liked their employment experience? This is a great real-life example of how hospital mergers and acquisitions harm not only the community's health, but also the employees that "will never work there again" due to particular experiences.
- Directs HHS to support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.
Health Insurance: Consolidation in the health insurance industry has meant that many consumers have little choice when it comes to selecting insurers. And even when there is some choice, comparison shopping is hard because plans offered on the exchanges are complicated—with different services covered or different deductibles.
In the Order, the President:
- Directs HHS to standardize plan options in the National Health Insurance Marketplace so people can comparison shop more easily.