Preemptively support collective bargaining and higher local minimum wages in communities where employers may have the opportunity to exercise monopsony power.I conclude the issue brief with four possible policy responses based on the findings in my working paper. These findings have significant implications for potential policy responses when labor markets are not competitive. My results provide the backdrop for a discussion of how this retail giant and other large, low-wage employers may gain the ability to exercise monopsony power. In this issue brief, I provide some context for thinking about the role that Walmart Supercenters play in local labor markets in the United States before outlining the novel approach I use to estimate their impact on several outcomes of interest. These results run contrary to what economists would expect if labor markets were competitive. Specifically, I demonstrate that local Supercenter entry reduced countywide aggregate employment and earnings while an increase in the minimum wage caused local aggregate and retail employment to increase in counties that had a Supercenter. In my working paper, “ Walmart Supercenters and Monopsony Power: How a Large, Low-Wage Employer Impacts Local Labor Markets,” I provide evidence that Walmart Inc.-the largest private-sector employer in the United States-exercised monopsony power in labor markets where the firm opened Supercenter stores, with consequences well beyond the retail sector. If growing local monopsony power in the retail sector pushed local wage floors downward, with spillovers on workers in other local industries, then the role of monopsony power on aggregate labor income inequality may be substantial. Importantly, however, he estimates sharp increases in both national and average local labor market concentration in the retail trade industry.Īnother conclusion is possible. Census Bureau concludes that local labor market concentration has not been a major contributor to growth in aggregate labor income inequality because he finds average local labor market concentration has fallen since the mid-1970s. The majority of workers, however, are not in highly concentrated labor markets. But there is still debate over the degree to which monopsony power may be responsible for aggregate labor income inequality.Įconomist Anna Stansbury at the Massachusetts Institute of Technology’s Sloan School of Management and her co-authors, for example, find that the wages of nearly 12 percent of workers in the United States are substantially suppressed by employer concentration. London School of Economics professor Alan Manning has argued that the source of all these tributaries is essentially labor market “thin”-ness or “employer concentration.” Manning and other economists find that increased local monopsony power reduces wages, especially at the lower end of the income distribution. policymakers can do something about it Download Walmart is a monopsonist that depresses earnings and employment beyond its own walls, U.S. Put simply, monopsony power is the ability of an employer to set wages below the level that would hold if the labor market were competitive, or “free.” This wage-setting power can stem from, among other channels, collusive behavior among employers, excessive costs for workers to access jobs or find new ones, and reduced competition in the labor market resulting from competitive frictions in other markets. workers’ exposure to international trade amid rising globalization, the declining real value of the minimum wage (especially in the 1980s and particularly for women), and declining unionization rates.īut many economists also believe employer monopsony power contributes to labor income inequality. This has been variously attributed to several factors-including technological change that shifted the demand for labor away from “middle-”educated workers, the growing adoption of industrial robots, U.S. For 35 years beginning around 1980 the wages of workers steadily grew more and more unequal. Labor income inequality is a major cause for concern in the U.S.
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