Labour Market Polarisation, Job Tasks and Monopsony Power

Bachmann, Ronald; Demir, Gökay; Frings, Hanna

doi:10.2139/ssrn.3758690

Cited by 4 publications

(4 citation statements)

References 36 publications

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“…Hence, labor market concentration enables firms to push down large portions of the wage distribution, with greater monopsonistic exploitation at the top than at the bottom end of the distribution. This heterogeneity mirrors related evidence that non-routine cognitive workers in Germany are subject to a higher degree of monopsony power than routine or non-routine manual workers (Bachmann et al, 2021).…”

Section: Effects Of Labor Market Concentrationsupporting

confidence: 70%

Minimum Wages in Concentrated Labor Markets

Popp

2021

Preprint

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Economists increasingly refer to monopsony power to reconcile the absence of negative employment effects of minimum wages with theory. However, systematic evidence for the monopsony argument is scarce. In this paper, I perform a comprehensive test of monopsony theory by using labor market concentration as a proxy for monopsony power. Labor market concentration turns out substantial in Germany. Absent wage floors, a 10 percent increase in labor market concentration makes firms reduce wages by 0.5 percent and employment by 1.6 percent, reflecting monopsonistic exploitation. In line with perfect competition, sectoral minimum wages lead to negative employment effects in slightly concentrated labor markets. This effect weakens with increasing concentration and, ultimately, becomes positive in highly concentrated or monopsonistic markets. Overall, the results lend empirical support to the monopsony argument, implying that conventional minimum wage effects on employment conceal heterogeneity across market forms.

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Section: Effects Of Labor Market Concentrationsupporting

confidence: 70%

Minimum Wages in Concentrated Labor Markets

Popp

2021

Preprint

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“…Measuring the separation response to these components of the wage is not informative about the central question of monopsony power, which measures the responsive-ness of a rm's labor supply to the component of wages that is specically due to arbitrary dierences in wages set by employers. This discrepancy may perhaps explain why recent quasi-experimental estimates of labor supply elasticity tend to nd values between 2 and 5 (Caldwell and Oehlsen (2018), Cho (2018), Kroft et al (2020), see also the multiple estimates from Dube, Manning, and Naidu (2019) and the meta-analysis by Sokolova and Sorensen (2018), who report that the median separations-based labor supply elasticity estimate is 1.7), even though some recent papers using the traditional approach (e.g., Webber (2015), Booth and Katic (2011) and Bachmann, Demir, and Frings (2018)) continue to nd much smaller elasticities of between 1 and 1.2, while others nd elasticities approaching 3 and 4 (Hirsch, Schank, and Schnabel (2010).…”

Section: Introductionmentioning

confidence: 99%

Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies

Bassier

Dubé

Naidu

2020

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Dube acknowledges support from the Washington Center for Equitable Growth. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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“…In such a situation, dubbed "dynamic monopsony" by Ashenfelter et al (2010) as workers cannot switch employers costlessly to exploit wage differentials, both the separation rates amd recruitement probabilities depend on wages and firms can exploit an inelastic labour supply (Manning, 2003(Manning, , 2020. 5 Importantly, such situations of imperfect substitutability might arise more frequently as workers acquire more job-specific skills that cannot easily be used elsewhere (Bachmann et al, 2020). 6 Finally, jobs might not only be differentiated according to the skills they require but also regarding the amenities and perks employers offer to their workers and which might appeal to them differently because of preference heterogeneity (see Manning, 2020, for a discussion and synthesis of these different approaches).…”

Section: What Is Labour Market Monopsony and Why Do We Care?mentioning

confidence: 99%

How has labour market power evolved? Comparing labour market monopsony in Peru and the United States

Dávalos¹,

Ernst²

2021

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We document and compare the extent and evolution of labour market power by employers on the US and Peruvian labour markets during the 2010s. Making use of a structural estimation model of labour market dynamics, we estimate differences in market power that workers face depending on their sector of activity, their age, sex, location and educational level. In particular, we show that differences in cross-sectional market power are significant and higher than variations over the tenyear time span of our data. In contrast to findings of labour market power in developed countries such as the US, we document significant market power of employers in Peru vis-à-vis the tertiary educated workforce, regardless of age and sector. In contrast, for the primary educated workforce, market power seems to be high in (private) services and manufacturing. For secondary educated workers, only the mining sector stands out as moderately more monopsonistic than the rest of the labour market. We also show that at least for the 2010s, labour market power declined in Peru. We contrast these findings with similar estimates obtained for the United States where we are able to show that increases in labour market power are particularly acute in certain sectors, such as agriculture and entertainment and recreational services, as well as in specific geographic areas where these sectors are dominant. Moreover, we show that for the US, the labour market power has gradually increased over the past ten years, in line with the general rise in inequality. Importantly, we show that the pervasive gender pay gap cannot be linked to differential market power as men face higher labour market power than women. We also discuss possible reasons for these findings, including for the differences of labour market power across skill levels. Especially, we discuss the reasons for polarization of market power that are specific to sectors and locations.

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Labour Market Polarisation, Job Tasks and Monopsony Power

Cited by 4 publications

References 36 publications

Minimum Wages in Concentrated Labor Markets

Minimum Wages in Concentrated Labor Markets

Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies

How has labour market power evolved? Comparing labour market monopsony in Peru and the United States

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