Food for Thought

I've come across an interesting study from the Council of Economic Advisors.

One of the effects of the increasing concentration in American business is that it creates a labor market monopsony which allows employers to push down wages:(PDF)

An excerpt:

There is also growing concern about an additional cause of inequity—a general reduction in competition among firms, shifting the balance of bargaining power towards employers (Furman and Orszag 2015). Such a shift could explain not only the redistribution of revenues from worker wages to managerial earnings and profits, but also the rising disparity in pay among workers with similar skills. These trends also have broader implications for the economy as a whole: instead of promoting growth, forces that undermine competition tend to reduce efficiency, and can lead to lower output, employment, and social welfare.

A growing literature has documented several indicators of declining competition in the United States, and economists have begun to explore the links between these trends and rising income inequality (Furman and Orzag 2015). While recent discussions have highlighted rising concentration among producers and monopoly pricing in sellers markets (The Economist 2016), reduced competition can also give employers power to dictate wages—so-called “monopsony” power in the labor market. While monopoly in product markets and monopsony in labor markets can be related and share some common causes, the latter has some distinct causes and policy implications.

This issue brief explains how monopsony, or wage-setting power, in the labor market can reduce wages, employment, and overall welfare, and describes various sources of monopsony power.1 It then reviews evidence suggesting that firms may have wage-setting power in a broad range of settings and describes several trends in recent decades consistent with a growing role for monopsony power in wage determination. It concludes with a discussion of several policy actions taken by the Obama Administration to help promote labor-market competition and ensure a level playing field for all workers.

Monopoly is when you have a single supplier. Monopsony is when you have a single buyer.

This is yet another case where the right wing monopoly theory fails: The damage from monopolies and economic concentration is not limited to higher consumer prices.

In fact this interpretation of modern antitrust law has been wrong from the very beginning.

Even a cursory examination of the creation of anti-monopoly laws clearly shows that the legislative intent was largely directed toward barriers to competitors entry into markets.

Of course, history, or truth, or public benefit, or basic integrity never mattered to Robert Bork and Evil Minions^™.

They developed the theory starting with the goal of increasing the power of the elites, and worked backwards.