As the Biden administration works to promote what it calls its pro-labor agenda, a new analysis by the Treasury Department finds that monopsony power – a market structure in which there is only one buyer – among employers throughout the U.S. economy has reduced wages by roughly 20% on average.
“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,” the report says. “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.”
Companies achieve monopsony power through multiple means, including non-compete clauses, nondisclosure agreements, outsourcing and mergers that reduce the number of employers. “There is a long list of insidious efforts to take power out of the hands of workers and seize it for employers’ gain,” Seth Harris, deputy director at the National Economic Council and deputy assistant to the president for labor and the economy, told The New York Times.
A lack of meaningful competition among employers results in lower pay, higher inequality, deteriorating working conditions and greater rewards for business owners, the report says. It also reduces overall employment by diminishing incentives for companies to invest and by impeding the creation of new firms.
The report highlights some of the corrective measures that are being pursued by the Biden administration, including a higher minimum wage, restrictions on the use of non-compete clauses, increased anti-trust enforcement and legislation to support unionization efforts.