1. How Much Does Monopsony or Monopoly have to do with Wage Stagnation or Inequality? : Not Much
Lawrence Mishel
Economic Policy Institute
Boston University Competition Conference, July 2018

2. What needs to be Explained?
The Basic Facts
What needs to be Explained?

3. Decomposing Productivity-Median Hourly Compensation Gap

5. Key Wage Gaps
1. Top 1% vs. top (90th, 95th); 2. Top vs. middle (95/50); and 3. Middle vs. bottom (50/10)

10. What about Monopsony?
Terrific that economists are exploring rising employer power in labor market to explain wage stagnation and inequality
Gravitate to one model: Monopsony or Monopoly
Be careful, though, as monopsony:
Can affect wages and motivate antitrust action
But has not been shown to affect wages over time due to rising monopsony or greater impact of given level of monopsony: no evidence, yet, monopsony related to wage stagnation or inequality

11. Three meanings of Monopsony
‘Literal Monopsony’: employer concentration in labor market
‘Dynamic monopsony’ (i.e. Manning): restricted options; incomplete information; transportation costs; caregiving responsibilities.
‘Metaphorical Monopsony’: Impact of unemployment, labor standards, employer practices, weak unions = systematic disempowerment of workers

12. Be Aware “The majority of US labor markets are highly concentrated”
Not =
‘Majority of workers face high concentration’

16. a. Historical pattern does not fit;
What about Monopoly?
Some questions about trend?
a. Historical pattern does not fit;
b. Is increase enough, broad enough, to high enough level?

17. Product Market Concentration & Wage Stagnation

18. Average CR20 rises from 20.9% to 22.6%
Goldman-Sachs
The average change in the CR20 in across the 14 industries is pp;
Average CR20 rises from 20.9% to 22.6%

19. Empirical Impact of Monopoly?: Autor et al (2017)
Product market concentration has increased for some sectors—but at varied rates and to low levels—and the scope of its downward pressure on wages is also limited.
Product market concentration rose steadily across six sectors from 1982 to (manufacturing, retail, wholesale, services, finance, and utilities and transportation), but the magnitude of this rise has varied substantially and it is unclear how much product market concentration has affected labor market trends.
The new literature on product market concentration (if explains 1/3 of drop in labor’s share) may have reduced overall wages by roughly 0.08 percent annually from 1979 to 2015, or less than 10 percent of the total divergence between a typical worker’s pay and productivity over that period.
Source: David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reenen “The Fall of the Labor Share and the Rise of Superstar Firms.” Massachusetts Institute of Technology Working Paper, May 2017.

20. Lodestar for economic policy should be balanced, not
Lodestar for economic policy should be balanced, not necessarily competitive, labor markets
As theoretical and empirical matter: * Labor market not like other markets * Fundamental inequality of power or asymmetry between employers and employees does not depend on monopsony * Not a special case, as in monopsony

21. Context: Power Asymmetry
Vast majority live paycheck to paycheck
Little or no wealth
No staying power
Safety net eroded
Limited options

22. Missing Pieces
Policy choices, on behalf of those with most wealth and power, that have undercut wage growth of a typical worker:
Excessive unemployment;
Weakened labor standards;
New management practices
Eroded institutions: collective bargaining

23. Specific factors First Day fairness:
(a) Anti-poaching ;(b) Forced arbitration/class action waivers; and
(c ) Lack of transparency on job, status, pay, deductions, legal employer
Labor standards:
(a) Minimum wage; (b) Overtime rules; (c ) Misclassification; (d) Wage theft/enforcement
Structural
Fissuring: Contracting out/outsourcing; Temping; Franchising
Deregulation
Privatization
Dominant buyer

24. End
It’s not just monopoly and monopsony: How market power has affected American wages By Josh Bivens, Lawrence Mishel, and John Schmitt, April 25, monopoly-and-monopsony-how-market-power- has-affected-american-wages/

25. Trend in HHI