Low Wages from Business Consolidation?

[lpetrich]

This is about the United States, but similar things may be happening elsewhere.

A new theory for why Americans can’t get a raise. nothing Labor Market Concentration

If you were a delivery van driver searching for a new job any time between the years of 2010 and 2013, chances are, you wouldn’t have found many businesses competing for your services. In Selma, Alabama, there was, on average, just one company posting help wanted ads for those drivers on the nation’s biggest job board. In all of Orlando, Florida, there were about nine. Nationwide the average was about two.

There is a paucity of potential employers in several other fields.

The degree of concentration, and the effect on wages, tended to be worse in smaller towns than major cities. Places like Alpena, Michigan, and Butte, Montana, had the least competition among employers, while New York, Chicago, and Philadelphia had the most. It also varied by occupation. Equipment mechanics, legal secretaries, telemarketers, and those delivery drivers faced some of the most highly concentrated job markets; registered nurses, corporate salesmen, and customer service representatives had some of the least. But overall, the problem looks pervasive.

Thus, many employers are monopsonies or oligopsonies, the buying counterpart to monopolies and oligopolies.

This theory does not rule out other possibilities for workers getting less and less of the GDP, like suppression of labor unions and automation and financiers threatening to downgrade businesses for not paying their employees less.

This has various policy implications. Labor unions and the minimum wage can be good ways of coping with employment monopsonies and oligopsonies. It also suggests an additional concern for antitrust actions.

[Politesse]

I don't think the legal situation - strongly favoring the "rights" of shareholders over employees - can be safely overlooked. Even as many markets open up again, companies just aren't authorized to try and attract employees by means of higher wages, they are swiftly punished if they try... companies, working together, can say that they are "offering a standard salary range" only and as long as everyone in that industry follows suit, so that is the situation market interactions will shove corporations towards. Indeed, this is part of the mechanism of the oligopsony.

Labor unions and the minimum wage can be good ways of coping with employment monopsonies and oligopsonies. It also suggests an additional concern for antitrust actions.

The government could also help things by encouraging, rather than discouraging, investment in research and entrepreneurial ventures that could create new jobs and industries.