Monopolies maybe worse for workers than for the consumers (2)

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.That’s consistent with the story that dominant employers are using their market power to hold down wages in areas where workers don’t have many choices. There could be other explanations — for example, towns with few employers tend to have lower wages in general.