In a company town, how much power does the company have?
Miners anticipated a bit of gunslinging when they went on strike in southeastern Kentucky in 1973. Dissenting coal workers in the county known as Bloody Harlan had a history of ending up beaten, stabbed or shot.
Union miners and their coal company bosses took up arms during the 1930s in a fight over wages and working conditions. In the absence of peaceful negotiation, violence became a tool of both oppression and resistance. During 1973’s Brookside strike, with the bosses at Eastover Coal Co. refusing to meet the union at the bargaining table, miners, their wives, replacement workers and company men confronted one another on the picket line with guns in their hands.
The violence was a symptom of an imbalance of market power since the founding of coal towns like those in Harlan County. Coal companies often constructed entire towns next to their remote mines, building housing, retailers, schools and houses of worship for workers.
At their peak, there were as many as 2,500 single-enterprise towns in the U.S. Some were billed as workers’ utopias, but most company towns were built quickly and cheaply. Employers could dictate what residents could do and say, even when workers were off the clock. Those who opposed the bosses’ rules had little recourse; company towns weren’t democracies.
“There was tremendous resentment,” said Drake University professor William Boal, citing the pressure on workers to buy from company-owned stores. “Many union contracts had a clause in them that said workers may purchase wherever they please; they’re under no obligation to buy from the company store. They wouldn’t have put that in the union contract if people weren’t very upset about it.”
Many economic models assume perfect competition in the labor market, where supply (workers) and demand (employers) equally determine wages. But competition in the real labor market is imperfect. Especially in a company town, where employers aren’t just wage payers but educators, landlords and medical providers. The cost of losing one’s job is greater than lost wages. Speaking out could get you both fired and evicted from company-provided housing, a common practice in coal country when workers tried to organize or went on strike.”The company town is one extreme, where the only alternative to what your employer is setting as the wage is to leave town,” said Suresh Naidu, an economist and professor at Columbia University. Unions offered coal mine workers, who had few alternative job prospects, a way to check their employer’s power, especially crucial when their employer was the only one in town.
Even with unions, workers sometimes faced an uphill battle. In “Harlan County U.S.A.,” Brookside workers were forming a new union in part because they thought their previous one was too cozy with management. One worker recounted that going on strike drew pressure from politicians, police, even priests, all of whom seemingly sided with the demands of companies over employees who faced extremely dangerous working conditions.
“When you take a position against the coal operators, against the capitalists,” the miner said, “the government is acting as their muscle man. That’s the money of Kentucky at work, breaking the organized labor.”Many company towns operated like a monopsony — the sole buyer of a particular good, in this case labor. But whether that monopsonistic power enabled employers to cut wages and retain workers is hard to measure, in part because of booms and busts in the economy.
A 1923 report on turnover in the coal industry found that miners from company towns actually quit at twice the rate of other industries at the time, and there are several examples of employers that attempted to cut or freeze wages facing mutinous uprisingsas a result.
But unions did often boost workers’ power to increase wages, especially during hard times, Boal said. In certain periods, a unionized coal miner could make 30% to 40% more than a nonunionized one, and turnover rates were significantly lower in organized shops.
Wage differentials like these help explain why mining companies fiercely resisted workers’ attempts to organize. Most mining required few specialized skills, so coal bosses often treated disgruntled workers as a replaceable commodity. Once they organized, however, it became harder to fire workers who wanted more than what employers were willing to give.
Beyond wages, unionized mines also tended to be safer. By one recent estimate, fatalities on the job were as much as 83% lower in union mines than in nonunion settings.
Few, if any, company towns exist today — though some former sites, including a shuttered coal mine in Harlan County, are now tourist attractions.
“Literal company towns, where there’s one town and one employer, are probably very rare. But effective company towns are much more widespread,” said Naidu. “They’re just hard to measure because the boundaries of what a worker’s given set of options is is not well defined by any natural administrative boundary.”Even though company towns have been relegated to history books, many employers still hold more market power than workers do, based on economic data measuring “quit elasticity” — how likely a worker is to quit a job in response to changes in their wages.
A competitive market would show 10% of workers quitting when an employer cuts wages by 1%. Even during the pandemic when many workers had more options to find better jobs, the market didn’t reach that level, Naidu said. When wages fell 1%, only 4% and 6% of workers quit.
Factors like commute time, schedule flexibility and health care benefits are now bigger factors when workers decide to quit than living and working in a remote location.
While mining companies now rarely offer permanent housing to workers, like they did more than 100 years ago, other industries are experimenting with providing company-built, subsidized housing. Rather than raise wages, these employers are turning affordable housing into a benefit.
“Most of us don’t shop for jobs nearly as frequently as employers shop for workers,” said Naidu. “We have all sorts of attachments to places and particular amenities. And so, there’s always going to be some scope for employers to lowball your wage a little bit. And you’ll be like, ‘Fine, I’ll take it.'”
How to watch along with us
“Harlan County U.S.A.” is available to stream on Max and the Criterion Channel, with a subscription. It also may be available to borrow at your local library.
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