Monopolies maybe worse for workers than for the consumers (1)

Economists are starting to ask whether increasing industrial concentration is choking off productivity growth, reducing capital investment, throttling or deterring would-be entrepreneurs, 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.

Economists and policy makers 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.