Current Events > New study suggests the cause of wage stagnation is corporate monopsony

(+) Yeah! (+)

http://www.nber.org/papers/w24147

working paper version available here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3088767

tl;dr:

monopsony is the labor equivalent of monopoly on supply of a good; it's a monopoly on jobs, essentially being the only employer in town for a given line of work. examples would include an isolated hospital with no other medical center for a hundred miles.

a major driver in wage stagnation is that while there are many jobs available, they're generally all held by the same employer, so there's no competition or poaching of employees, allowing the company to offer lower starting pay and fewer raises, since employees cannot easily change jobs to a higher-paying competitor.

the metric used to measure monopsony is the same one used by the dept of to identify when to challenge corporate mergers, and it's about 25% above the mark at which the federal government typically sues to block mergers.
---

I feel like this is what Haliburton, Baker Hughes, D&L Oil Tools, and a few others have on Oklahoma. Their corporate banners are displayed in the capitol building there, after all.
---

the idea of corporate banners in a capitol building is really disturbing
---

Darkman124 posted...

the idea of corporate banners in a capitol building is really disturbing

It honestly should be used in court as an admission of guilt.
---

This definitely happens in the medical field. There could be ten hospitals in the area but 5 are owned by one corporation. Then one corporation owns the other 5.
---

Seems like simple economics to me. When there's one buyer, prices don't have very much flexibility.

in other news, most plants are green. at 5:30, water is wet
---

B-but wages are rising!

Adam smith predicted this problem in the wealth of nations iirc
---

"We're a big employer in the middle of nowhere, so we aren't going to pay you much because you don't have many options."

What's the opposite of that?

"We're a big employer in a huge city, so we aren't going to pay you much because we have a lot of options."

Maybe if people were a bit more careful in picking their field, these issues wouldn't happen.
---

Fishy posted...

Darkman124 posted...

the idea of corporate banners in a capitol building is really disturbing

It honestly should be used in court as an admission of guilt.

There's several reasons I generally call Oklahoma itself cancer, that being one of them.
---

r4X0r posted...

Maybe if people were a bit more careful in picking their field, these issues wouldn't happen.

the issue noted is this is happening in fields that are 'good' and 'in demand' and it's because they're all in demand by the same people
---

Might this be related to the centralization of business in corporate giants? Like Walmart shutting out small businesses?
---

EnragedSlith posted...

Might this be related to the centralization of business in corporate giants? Like Walmart shutting out small businesses?

yes

slate had a really shitty article on the study basically arguing it's an endorsement for market manipulation type policies like a higher min wage
---

Darkman124 posted...

EnragedSlith posted...

Might this be related to the centralization of business in corporate giants? Like Walmart shutting out small businesses?

yes

slate had a really shitty article on the study basically arguing it's an endorsement for market manipulation type policies like a higher min wage

lol, that's where I originally saw this study actually

that was a bad article, which I thought this topic was going to link to tbh
---

Balrog0 posted...

that was a bad article, which I thought this topic was going to link to tbh

ye of little faith

i almost feel positive feelings when i come to this community, so my cold robot heart makes those extra cycles and hunts down the original research, even the source

the fact that you assumed that in clicking the topic would make me sad if i had the capacity to feel sad about anything unrelated to dogs
---

I'm beginning to think we don't actually know anything.
---

It's probably a factor but there's no one thing that creates stagnation. It's a multitude of fucked up shit.
---

voldothegr8 posted...

It's probably a factor but there's no one thing that creates stagnation. It's a multitude of f***ed up s***.

some things matter more than others.

the present admin is trying to argue it's a surplus of local workers and that appears to be designed to do this:


---

Darkman124 posted...

Incorrect.
The guy in the middle will hand over his Oreo voluntarily, in exchange for a shiny Ferrero Rocher.
Meanwhile, an unseen entity will forcefully confiscate oreoes from the other two guys, build a catapult to launch oreoes off the back porch, and give the guy on the left a couple more crumbs.

don't forget the part where the guy on the right will call the cops on the guy on the left, claim his oreo crumbs are actually cocaine, and they're all confiscated by the police as "evidence" while he's beaten up by them!

or the part where the oreos are launched at brown people's houses

the point remains, though: local competition is rarely the problem for workers. global competition is a problem, and local consolidation is a far bigger problem than any of us realized.
---

Darkman124 posted...

and local consolidation is a far bigger problem than any of us realized.

No it isn't.
The effects of monopolies have been known for quite some time.

Questionmarktarius posted...

No it isn't.
The effects of monopolies have been known for quite some time.

the effects of monopsonies, the topic of this thread, have not.
---

Darkman124 posted...

voldothegr8 posted...

It's probably a factor but there's no one thing that creates stagnation. It's a multitude of f***ed up s***.

some things matter more than others.

the present admin is trying to argue it's a surplus of local workers and that appears to be designed to do this:

All thanks to government interference.
---

darkjedilink posted...

Darkman124 posted...

voldothegr8 posted...

It's probably a factor but there's no one thing that creates stagnation. It's a multitude of f***ed up s***.

some things matter more than others.

the present admin is trying to argue it's a surplus of local workers and that appears to be designed to do this:

All thanks to government interference.

The Zero-sum fallacy is why this idea even exists.

https://fee.org/articles/the-seven-deadly-fallacies-of-bad-economics/

The Fallacy of Static Wealth and the Fallacy of the Zero-Sum Game

These twin fallacies take the form of a sort of picture dominating the thinking of many people. Economic activity is depicted in terms of a poker game. One players chips are observed to have increased. Immediately one concludes that some other player has lost chips. Poker is, as they say, a zero-sum game: Gains enjoyed by one party must be balanced by losses suffered by another. So it is, people embracing the fallacies of static wealth and the zero-sum game insist, with economic exchanges. Winners must be balanced by corresponding losers.

Questionmarktarius posted...

darkjedilink posted...

Darkman124 posted...

voldothegr8 posted...

It's probably a factor but there's no one thing that creates stagnation. It's a multitude of f***ed up s***.

some things matter more than others.

the present admin is trying to argue it's a surplus of local workers and that appears to be designed to do this:

All thanks to government interference.

The Zero-sum fallacy is why this idea even exists.

https://fee.org/articles/the-seven-deadly-fallacies-of-bad-economics/

The Fallacy of Static Wealth and the Fallacy of the Zero-Sum Game

These twin fallacies take the form of a sort of picture dominating the thinking of many people. Economic activity is depicted in terms of a poker game. One players chips are observed to have increased. Immediately one concludes that some other player has lost chips. Poker is, as they say, a zero-sum game: Gains enjoyed by one party must be balanced by losses suffered by another. So it is, people embracing the fallacies of static wealth and the zero-sum game insist, with economic exchanges. Winners must be balanced by corresponding losers.

It's scary that anyone thinks this, much less enough to cause some of the bloodiest conflicts in world history.
---

Darkman124 posted...

Questionmarktarius posted...

No it isn't.
The effects of monopolies have been known for quite some time.

the effects of monopsonies, the topic of this thread, have not.

Which is a monopoly, just on the demand side.

you're taking the analogy way too literally

the point i'm using the gif to illustrate is that middle class workers are losing out and are being told immigrants are to blame, when the reason they're losing out is companies have grown so large they can undermine the workers' negotiating power.

what would benefit workers is to demand the companies be forced to break up by the government, while instead they pointlessly quarrel with immigrant workers and allow the companies to consolidate further, reducing their capacity to negotiate wages even more

that the pie is growing is meaningless to those middle class workers as their wages have been stagnant since the 1980s.

changing the subject to specific scenarios such as rent control doesn't change that.
---

Darkman124 posted...

you're taking the analogy way too literally

the point i'm using the gif to illustrate is that middle class workers are losing out and are being told immigrants are to blame, when the reason they're losing out is companies have grown so large they can undermine the workers' negotiating power.

what would benefit workers is to demand the companies be forced to break up by the government, while instead they pointlessly quarrel with immigrant workers and allow the companies to consolidate further, reducing their capacity to negotiate wages even more

that the pie is growing is meaningless to those middle class workers as their wages have been stagnant since the 1980s.

What is with this idea that problems caused by government intervention will be solved BY MORE GOVERNMENT INTERVENTION?
---

darkjedilink posted...

What is with this idea that problems caused by government intervention will be solved BY MORE GOVERNMENT INTERVENTION?

you saying "government intervention caused this" does not mean government intervention caused this
---

I don't know if any of you have read any of Infinite Jest, but we're moving closer and closer to subsidized time. One day we will be living in the Year of the Whopper (and so on).
---

Darkman124 posted...

darkjedilink posted...

What is with this idea that problems caused by government intervention will be solved BY MORE GOVERNMENT INTERVENTION?

you saying "government intervention caused this" does not mean government intervention caused this

Simple corruption did, usually far more local than you'd think.
Just look into why your town has one cable company, one electric company, and maybe two ISPs. The reason is almost always going to be municipal franchise.

http://www.dailyrepublic.com/opinion/local-opinion-columnists/are-municipal-monopolies-really-garbage/

Questionmarktarius posted...

Just look into why your town has one cable company, one electric company, and maybe two ISPs. The reason is almost always going to be municipal franchise.

this is way more endemic than you're suggesting and goes far past 'government corruption' as an explanation of cause

read the study

i don't expect darkjedilink to read the study. i do expect you to.
---

Darkman124 posted...

read the study

I did, but that was yesterday.

Questionmarktarius posted...

Darkman124 posted...

read the study

I did, but that was yesterday.

then you know this is not something you can handwave away as an artifact of utilities/telecoms. it's in every sector.

it extends to industries where competition isn't being suppressed by government. it has become more efficient for a company to be huge rather than small.
---

Darkman124 posted...

it has become more efficient for a company to be huge rather than small.

That's largely because a garage business doesn't have the resources or contacts to outsource to Asia.

---

Questionmarktarius posted...

Darkman124 posted...

it has become more efficient for a company to be huge rather than small.

That's largely because a garage business doesn't have the resources or contacts to outsource to Asia.

definitely--globalization has played a huge part in passing the advantage to larger corporations over smaller ones.
---

I said it 8 years ago when all the bullshit safety rules started really infiltrating into residential construction.

"Its all about strangling out the little guys"

And its true. All the rules and regulations are there to make it very difficult to operate business as a small company.

Rich get richer
---

Questionmarktarius posted...

Darkman124 posted...

darkjedilink posted...

What is with this idea that problems caused by government intervention will be solved BY MORE GOVERNMENT INTERVENTION?

you saying "government intervention caused this" does not mean government intervention caused this

Simple corruption did, usually far more local than you'd think.
Just look into why your town has one cable company, one electric company, and maybe two ISPs. The reason is almost always going to be municipal franchise.

http://www.dailyrepublic.com/opinion/local-opinion-columnists/are-municipal-monopolies-really-garbage/

Which is perpetuated due to government regulations under the guise of preventing a national monopoly.
---