Monopoly power is a hot topic of economic debate. Economists are starting to ask whether increasing industrial concentration is choking off productivity growth, reducing capital investment, throttling or deterring would-be entrepreneur, raising consumer prices and reducing the share of national income flowing to workers.
This is a good and important effort. But it’s also possible that with all the attention being paid to concentration at the industry level, there hasn’t been enough focus on the other end of the monopoly problem - local labor markets.
Monopoly means there’s only one company to sell you products, like broadband services or airline tickets. If there’s only one company, or only a few, they can jack up the prices. But even if this is happening, the effect isn’t that severe. Looking at overall trends, we see that prices for consumer goods such as clothes, furniture, electronics and toys have generally fallen, while the prices of essentials like food, housing and transportation have risen only modestly - it’s health care and education that are driving inflation. But the real problem is the sluggish growth of real wages in recent years.
Economists and policymakers worried about industrial concentration may be focusing too much on the prices companies charge consumers, and not enough on the wages they pay their workers. Higher prices for airline tickets and broadband are annoying, but reductions in real wages are devastating, especially for the working class.
So in addition to monopolies, we need to think about local monopsonies - cases where there’s only one employer, or a few employers, in town. A company doesn’t need to be nationally big in order to be locally dominant - it could be a Wal-Mart branch, but it could just as easily be an independent lumber mill, coal mine or dairy farm.
If a locally dominant employer lowers wages, why don’t the workers just move away? They may be sentimentally attached to their home. They may not have the money to move, or may lack the networks that would allow them to find a job and settle in in a new location.
Or they may be two-income families that can’t move without finding two new jobs. Whatever the reason, it’s undeniably true that Americans are moving around the country less than they used to. That potentially makes them more vulnerable to wage suppression by employers that dominate the local market.
Recent empirical evidence suggests that these kinds of employers are, in fact, suppressing wages. A new paper by economists José Azar, Ioana Marinescu, and Marshall Steinbaum analyzes data from the website CareerBuilder.com, breaking down job postings by commuting zone and occupation.
They find that for occupations that have fewer employers posting on the website within a commuting zone, wages are lower than for occupations where lots of companies are looking for workers.
Noah Smith is a Bloomberg View columnist.