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How market power has affected American wages

Lafayette

Lafayette

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From the Economic Policy Institute: It’s not just monopoly and monopsony


Excerpt:
Economists have started to identify concentration in both labor and product markets as a potential threat to living standards and wages of typical American families. Concentration in product markets (a limited number of sellers) is generally labeled monopoly power while concentration in labor markets (a limited number of employers—or buyers of labor) is generally labeled as monopsony power.
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This focus on market power in the form of market concentration represents a welcome and overdue shift. For too long, many researchers tried to explain troubling trends in American workers’ wages with textbook models of perfectly competitive labor markets. Specifically, this long research effort claimed that rising wage inequality and slow wage growth for typical workers was the result of economic influences (such as new technologies) that “shift” demand and supply curves for labor in a competitive model. This approach has decisively failed.


This paper highlights some empirical findings from the new literature on the effect of labor and product market concentration on wages. We address three questions about market concentration that have not always been placed front and center in this literature.


The first question is, “Does concentration adversely affect wages at a point in time?”


The second question is, “Has concentration grown over time?”


The third question is, “Can growing concentration by itself explain a significant portion of the change in wage trends in recent decades?”


We find there is evidence to answer “yes” to the first and second questions but not the third. To be clear, the failure to answer affirmatively to the third question is not a criticism of these studies. The studies are not claiming that rising concentration alone can explain wage stagnation or inequality. Yet too many readers have taken these studies’ findings to this conclusion.
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By "concentration" I suggest it means (here) the oligopolization of markets that both concentrates industries from the competing many to the non-competing handful. The result is that the markets, without illegal coercion, settle into an informal pricing-pattern where there are only a handful of companies that do most of the business; which is clearly unfair.


Because competition is reduced, companies operating in oligopoly markets share non-competitive pricing structures that benefit themselves, and we Consumers pay higher prices for our Consumption of goods/services ...
 
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It is interesting that a perceived lack of sufficient private competition is seen as a huge problem by those who frequently advocate a public (government single-payer?) alternative as the best remedy. IMHO, some competition is still preferable to no competition - especially when public unions are involved.
 
ttwtt78640 said:
It is interesting that a perceived lack of sufficient private competition is seen as a huge problem by those who frequently advocate a public (government single-payer?) alternative as the best remedy. IMHO, some competition is still preferable to no competition - especially when public unions are involved.
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Why especially with public unions?
 
Also from the article:
Assessing the empirical findings of the new literature on market concentration

The literature on market concentration is still emerging, but a number of significant new contributions have been published in just the past few years. In this section we review the findings of a number of recent papers identifying market concentration as a force holding back American workers’ wage growth. Azar, Marinescu, and Steinbaum (2017); Benmelech, Bergman, and Kim (2018); and Naidu, Posner, and Weyl (2018) assess the effect of labor market concentration on wages, whereas Autor et al. (2017) and Struyven (2018) examine the rise in product market concentration and its potential effect on wages.

Our aim is to translate these papers’ findings into estimated effects that can be compared with effects of other factors found to contribute to wage growth and inequality so that we can provide a rough assessment of how much market concentration alone can explain wage inequality trends.
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Market concentration of Suppliers, even if naturally by means of buy-outs, is bound to affect employment. When merging two companies under the same management, it is almost always axiomatic that redundant-jobs arise and "somebody has to go". Especially in any case where markets are almost identical so a company does not need two separate groups now in the same company addressing the same market in the same territory.

Beyond a certain point, there is simply no good reason to allow consolidation of markets. And why have market-oversight authorities in the Justice Dept. been oblivious to this factor ...?
 
MrPeanut said:
Right, but isn't this research attempting to explain why the typical American's wages have been lagging over the past few decades? I'm not sure why admitting that workers in public unions earn more is a negative in this case.
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It is a negative if one must pay (via taxation) for someone to provide a more expensive good/service. If trash collection, for example, is provided for (mandated) by taxation then that precludes one from paying a private service to do that.
 
ttwtt78640 said:
It is interesting that a perceived lack of sufficient private competition is seen as a huge problem by those who frequently advocate a public (government single-payer?) alternative as the best remedy. IMHO, some competition is still preferable to no competition - especially when public unions are involved.
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So it has nothing to do with already huge established companies lobbying to maximise their control of the markets, lobbying to put their risk on the public while keeping all the profit? New companies can't form and compete because of unionized labor, and a single payer healthcare system somehow magically means single provider healthcare system?

Funny, my take away was, we need to break up everything that is to big to fail, and end corporate welfare that props up companies that would otherwise be unable to compete with their current business model. You know, go back to the supply and demand model that's worked so well up til Reagan convinced the low watt thinkers that Oligarchs have all our best interest at hearts...

But no, you're right, let's keep doing more of the same things that's put us in the mess we're in. The problem is we just haven't funneled enough to the top. Even though they have more wealth than they could spend in 100 lifetimes. They just don't have enough yet to make the system work. Once they do, it'll start trickling down. Just have to keep on course til it happens. Been 30+ years so far we've tried trickle down, not nearly enough time.

:roll:
 
ttwtt78640 said:
It is a negative if one must pay (via taxation) for someone to provide a more expensive good/service. If trash collection, for example, is provided for (mandated) by taxation then that precludes one from paying a private service to do that.
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This is about wages. If public union worker's earn more that would be considered a positive in this situation. The argument the research is making is that concentration of power in general has a negative impact on wages, but it does go on to say that the impact of labor concentration is very low and the impact of product concentration is low. There really isn't much to the study other than that.
 
ttwtt78640 said:
It is interesting that a perceived lack of sufficient private competition is seen as a huge problem by those who frequently advocate a public (government single-payer?) alternative as the best remedy. IMHO, some competition is still preferable to no competition - especially when public unions are involved.
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What amuses me about people like you is that you scream mightily about Free Competition, but when you are explained how it's manipulated by BigBusiness to obtain BigProfits from helpless Consumers, you (plural) go off the deep-end.

If you don't want to KNOW how markets actually work, what-the-hell are you doing in this debate-forum ... ?
 
Lafayette said:
it is almost always axiomatic that redundant-jobs arise and "somebody has to go". Especially in any case where markets are almost identical so a company does not need two separate groups now in the same company addressing the same market in the same territory.
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Companies buy each other every day and yet employment is 97% so what you say is obviously absurd! Wakey Wakey!!
 
Lafayette said:
but when you are explained how it's manipulated by BigBusiness to obtain BigProfits from helpless Consumers, you (plural) go off the deep-end.
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if it is manipulated why so afraid to give us a good representative example of this?? What does the liberal learn from his fear?
 
OP-er, it's not clear to me what specific points you want us to discuss.

Yes, the document you referenced is informative with regard to current research findings about the role and impact of labor market concentration. The thing is that the outcomes that research has identified are precisely the ones predicted by classical positive economic theory (science sense of "theory"). Of course, the authors take a normative stance regarding the nature of the trend they have opted to consider. That is what it is, but one must wonder whether their normative position warrants the qualitative pronouncement the authors have made about it. I'm now and have for some 25+ years been a socio-economic Darwinist, so the trend doesn't disconcert me to the same degree it does the paper's authors.


It's clearly stated in the literature review you've used as the thread's reference rubric that concentration in the labor market (what the authors expressly identify as monopsony power, not oligopoly power) has an impact, but only a tiny one, and they emphasize the miniscularity of labor market concentration's impact by depicting it multiply.
  • New research shows that labor market concentration is negatively correlated with wages. However, the effect of labor market concentration is comparatively modest when scaled against what we consider the most significant wage trend in recent decades: the growing gap between typical (median) workers’ pay and productivity.
  • The new research on labor market concentration implies that this concentration reduced wage growth by roughly 0.03 percent annually between 1979 and 2014, a decline that would explain about 3.5 percent of the total divergence between the median worker’s pay and economywide productivity over the same period.
  • Many labor markets suffer from high degrees of concentration, but most people work in labor markets with only low-to-moderate degrees of concentration.
  • It is unclear how much product market concentration (this may be monopoly or oligopoly power, depending on the extent of the concentration and the economic behavior of producers in the market segment in question) has affected labor market trends
  • The new literature on product market concentration indicates that it 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.
Am I of the mind that the meta-analysis the paper's authors have performed is valueless? No. I'm saying that while it's so that concentration has a deleterious impact on wage growth, neither labor nor product market concentration is impactful enough to militate for focusing amelioratively intended policy on attenuating (more than is already done) labor or product market concentration. I mean, really. Regardless of where one falls on the earnings spectrum, would one be content today had one's wages been 0.11%/year higher than they actually were? I hazard the answer to that question is "no."

Why have I presented the "0.11%" analysis I have above? Because I sense this discussion is about income inequality, which, though a perfectly fine thing to bitch about, is a symptom of a problem, not a problem in and of itself. Cure the actual problem and the income inequality will fix itself, as it were. The preceding remark necessarily bids one to ask what, then, is the problem. In my mind, there isn't just one problem; however, a fundamental problem is that most folks invest more energy into demagoguery than they invest in actually overcoming the problems.
 
Xelor said:
In my mind, there isn't just one problem; however, a fundamental problem is that most folks invest more energy into demagoguery than they invest in actually overcoming the problems.
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so why so afraid to tell us the most significant problem and how to over come it?? what do you learn from your fear?
 
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