The power keeping wages low

6 hours ago

Joan Robinson coined the term 'monopsony' in the 1930s to describe when a single buyer dominates a market, particularly relevant to employers buying labor.
Monopsony power allows employers with limited competition for workers to pay lower wages and offer worse conditions than in a competitive market.
Economist Arindrajit Dube argues in 'The Wage Standard' that monopsony power is widespread, driven by factors like employer concentration, job search frictions, and job differentiation.
Historically, mainstream economics focused on perfect competition, assuming minimal employer power and predicting that minimum wage hikes would increase unemployment.
Research by David Card and Alan Krueger in the 1990s challenged this, finding no job loss from minimum wage increases, renewing interest in monopsony theories.
Dube attributes rising income inequality since the 1980s to weakened counterforces like stagnant federal minimum wages, lax antitrust enforcement, and declining unions.
Policy solutions to combat monopsony power include higher minimum wages, sectoral bargaining, and corporate voluntary wage standards, as seen in movements like the Fight for $15.

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