Fighting monopsony, a lack of competition that harms workers · power". The same HHI threshold...
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Fighting monopsony, a lack of competition that harms workers Ioana Marinescu University of Pennsylvania & NBER Harvard Law, June 2018 Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 1/9
Transcript of Fighting monopsony, a lack of competition that harms workers · power". The same HHI threshold...
Fighting monopsony, a lack of competition that harmsworkers
Ioana Marinescu
University of Pennsylvania & NBER
Harvard Law, June 2018
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 1 / 9
Labor market concentration
Product market is concentrated when a few companies realize most ofthe sales, e.g. mobile telecom.
Labor market is concentrated when most jobs are held by just a fewcompanies.
Economic theory predicts that product market concentration(monopoly) increases prices and labor market concentration(monopsony) decreases wages.
The Herfindahl-Hirschman Index (HHI) in market m and year-quarter t is
HHIm,t = 10, 000J∑
j=1
s2j ,m,t
where sj ,m is the market share of firm j ’s vacancies in market m.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 2 / 9
Legal significance of labor market concentration
Antitrust agencies’ horizontal merger guidelines (Department ofJustice / Federal Trade Commission, 2010).
FTC/DOJ: an HHI above 1500 is ”moderately concentrated”, andabove 2500 is ”highly concentrated”.
A merger that increases the HHI by more than 200 points, leading toa highly concentrated market is ”presumed likely to increase marketpower”.
The same HHI threshold applies to seller and buyer power, hencerelevant for the labor market.
Define a labor market by a combination of occupation, commutingzone and quarter: e.g. accountants and auditors in Boston in the firstquarter of 2016.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 3 / 9
The majority of US labor markets are highly concentrated
Very High (5000-10000)High (2500-5000)Moderate (1500-2500)Low (0-1500)No data
HHI Concentration Category
From Azar, Marinescu, Steibaum and Taska (2018), using 2016 data from Burning GlassTechnologies.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 4 / 9
Higher concentration is associated with lower wages
10.3
10.4
10.5
10.6
10.7
Log
Rea
l Wag
e
-4 -3 -2 -1 0Log HHI (Vacancies)
From Azar, Marinescu, and Steibaum (2017), using data from CareerBuilder.com.After controlling for many factors, we find that a 10% higher HHI is associated with0.4% to 1.5% lower posted wages.Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 5 / 9
Merger analysis
Labor market concentration has increased since 1977 (Benmelech,Bergman, and Kim 2018).
Antitrust enforcement that is sensitive to anticompetitive effects inthe labor market may have limited this trend.
Hovenkamp and Marinescu (2018) discuss how labor market effectscan be incorporated in a merger review.
Following the Horizontal Merger Guidelines 2010: a merger thatincreases the labor market HHI by more than 200 points, leading to ahighly concentrated market is presumed likely to increase marketpower.
Given high labor market concentration, many mergers could beaffected.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 6 / 9
Anti-poaching agreements
Agreements by companies not to poach each other’s workers areunlawful and contribute to increasing labor market concentration bylimiting workers’ opportunities.
Anti-poaching agreement shows that two companies compete forworkers in the same market, and that collusion is profitable.
Anti-poaching agreement is evidence that a merger will likely lead toanti-competitive wage suppression.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 7 / 9
Non-competition agreements
Non-competition agreements limit workers’ opportunities to work fora company’s competitors after they leave their employer.
Non-competition agreements increase labor market concentration bylimiting the number of employers who can effectively compete forworkers.
Non-competition agreements should be added to other factorsmentioned in the Merger Guidelines as affecting the significance of agiven concentration level.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 8 / 9
Conclusion
Labor market concentration is high, and has been on the rise.
Labor market concentration is associated with lower wages.
Antitrust enforcement can readily take into account anticompetitiveeffects in the labor market.
Ioana Marinescu, UPenn & NBER Fighting monopsony Harvard Law, June 2018 9 / 9
