Labor Market Power
Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PST)
- Chair: Arindrajit Dube, University of Massachusetts-Amherst
Monopsony in the U.S. Labor Market
AbstractThis paper quantifies whether the U.S. labor market is characterized by employer market power and whether the degree of employer market power has increased over time. We find that the vast majority of U.S. manufacturing plants operate in a monopsonistic environment and, at least since the early 2000s, the labor market in U.S. manufacturing has become more monopsonistic. To reach this conclusion, we exploit rich administrative data for U.S. manufacturers and estimate plant-level markdowns — the ratio between a plant's marginal revenue product of labor and its wage. In a competitive labor market, markdowns would be equal to unity. Instead, we find substantial deviations from perfect competition, as markdowns average at 1.53. This result implies that a worker employed at the average manufacturing plant earns 65 cents on each dollar generated on the margin. Furthermore, we document a substantial amount of dispersion in markdowns across plants, even within detailed industries. To investigate long-term trends in employer market power, we propose a novel measure for the aggregate markdown that is consistent with aggregate wedges and also incorporates the local nature of labor markets. We find that the aggregate markdown decreased from the late 1970s up to the early 2000s, but has been sharply increasing afterward. When we compare often-used indexes of employment concentration with our markdown estimates, we find a dissimilar evolution over time. This weak relationship cautions against interpreting employment concentration as a proxy for employer market power.
Labor-Market Concentration and Labor Compensation
AbstractThis paper estimates the effect of labor-market concentration on labor compensation across the U.S. private sector since 2000. We distinguish between concentration in local labor markets versus local product markets, guarding against bias from confounded product-market concentration. Analysis extends beyond wages to rates of employment-based health insurance coverage. Estimates suggest negative effects of labor-market concentration on labor compensation. This comes through both reducing the human-capital level of those in the market and reducing pay conditional on human-capital level. Higher product-market concentration exacerbates and higher unionization rates mitigates these effects.
Variation in the impact of Explicit Oligopsony by Occupation
AbstractThere has been an explosion of interest in the role of very large employers and in employers with monopsony power in local labor markets. We use the detailed microdata of the Occupational Employment Statistics (OES) to estimate employer labor market power by occupation for nearly all workers in the United States, in all sectors, all occupations, and all geographic areas, from 2005 to 2017. We document wide variation in the extent and wage impact of explicit oligopsony by occupation. We further document how much of this variation can be explained by various occupational characteristics.
University of Chicago
Ioana Elena Marinescu,
University of Pennsylvania
- J4 - Particular Labor Markets