For too long opinion makers and courts in the US have held consumer welfare as the only criterion for anti-trust actions. This meant that the whole gamut of factors like market concentration, raising entry barriers, labour welfare etc had become marginal considerations for regulators. That now appears to be changing.
In his blog Matt Stoller points to a new report by the US Treasury Department on the relationship between monopoly power and labour. It does a literature review of research over the last ten years on the issue and claims that monopoly power deprives workers a lot of money, with an estimated "average wage losses to be on the order of 15-25 cents on the dollar (alternately, workers earn between 75 and 85 cents for each dollar of value produced)".
The report questions the Econ 101 view of employee-employer relationship
There is also increasing recognition that market power may be inherent in the firm-worker relationship. Much of the theory of labor markets and wage setting is premised on the idea that individual workers and firms search for one another, seek and find matches that maximize productivity and wages, and bargain over employment terms. Workers ofen find themselves at an informational disadvantage relative to firms, not knowing what other, similarly placed workers earn, the competitive wages for their labor, or the existence of workplace problems like discriminatory conduct or unsafe working conditions. Workers also may have a limited or no ability to switch locations and occupations quickly and may lack the financial resources to support themselves while they search for jobs that pay more and better match their skills and abilities. These conditions can enable firms to exert market power, and consequently ofer lower wages and worse working conditions, even in labor markets that are not highly concentrated.
Its diagnosis of the labour market,
The report catalogues the ways in which insuficient labor market competition hurts workers, documents the proliferation of barriers to job mobility, and illustrates how a lack of labor market competition can hold back the broader macroeconomy, while also providing an assessment of the degree to which lack of competition lowers wages... this report describes how monopsony power emerges when a single firm can restrain its hiring to lower wages and boost profits. While most labor markets do not literally feature a single employer, a market with a small set of employers may mimic a monopsony by each engaging in practices that give them market power over workers. Concentration in particular industries and locations can lead to workers receiving less pay, fewer benefits, and worse conditions than what they would under conditions of greater competition... Firms can engage in tacit collusion by sharing wage information for diferent occupations, conspiring to fix wages, adopting no-poach agreements where firms agree not to hire other firms’ workers, or forcing workers to sign non-compete agreements that limit their ability to switch jobs. Non-disclosure agreements can be so broad as to efectively operate as non-compete agreements. Mandatory arbitration agreements prevent workers from legal recourse to rectify violations of labor laws, antitrust laws, or employment terms. Lack of pay transparency, from firms’ use of salary history, pay secrecy, and punitive practices against workers sharing pay information, also restrains competition.
It lists out the different types of restrictions in employment agreements.
Matt Stoller has a summary of the numbers,
56.2% of non-union employees, or about 60 million workers, are subject to mandatory arbitration agreements... Nearly two-thirds of workers at firms with at least 1,000 employees are subject to mandatory arbitration clauses... Academic studies place the decrease in wages due to monopoly power at roughly 20% relative to the level in a fully competitive market. In some industries and occupations, like manufacturing, estimates of wage losses are even higher... A recent paper estimates that one-in-five workers is currently subject to non-compete agreements and double that number report having been bound by a non-compete agreement in the past... The labor market has become “fissured,” a wide variety of roles ranging from cafeteria workers and janitors to lawyers that were once “in-house” are now contracted out. This domestic outsourcing is estimated to reduce wages from 4 percent to 24 percent in some industries and occupations.
In another newsletter, Stoller points to recent developments where judges in US Supreme Court have come out in the open against the Section 230 of the Communications Decency Act, which legally underpins the Internet business by making firms like Amazon, Google, and Facebook not liable for content published on their sites.
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