Monopsony:
In economics, a monopsony (from Ancient Greek μόνος (mónos) “single” + ὀψωνία (opsōnía) “purchase”) is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. In the microeconomic theory of monopsony, a single entity is assumed to have market power over sellers as the only purchaser of a good or service, much in the same manner that a monopolist can influence the price for its buyers in a monopoly, in which only one seller faces many buyers. [Wikipedia]
Noted in “Politicians have caused a pay ‘collapse’ for the bottom 90 percent of workers, researchers say,” Christopher Ingraham, WaPo:
As [Josh] Bivens and [Heidi] Shierholz [of the left-leaning Economic Policy Institute] tell it, a relatively recent thread of economic research into monopsony power — which they define as “the leverage enjoyed by employers to set their workers’ pay” — has helped economists explain some of the wage stagnation observed in the United States over the past 40 years. You can think of monopsony power as the flip side of monopoly power: If monopoly power lets companies charge higher prices to consumers, monopsony power lets them pay lower wages to workers. Either way, it spells trouble for people who buy things and work for a living.
Research into monopsony power finds that many job markets are dominated by a relatively small number of employers. If you are, say, a coal miner, there may be just one or two coal mines within 100 miles of your home. If the mine you’re working at is treating you unfairly, you don’t have many options for finding a new job — particularly if you already left the other mine for similar reasons. In the absence of any serious competition for the most talented workers, employers have a huge amount of leeway in setting workers’ salaries, and they often set them at levels below what traditional economic theories would expect.
From the wider societal view, it sounds like cancer to me. The engine of the economy depends on workers earning a living and spending their earnings on both necessaries and optionals. The rapacity implicit in this article suggests that many workers in these situations are not able to contribute to the “thrash” of the market, as it were.
This is also ringing a bell in connection with Turchin and Nefedov’s Secular Cycles, which speaks to a stagflation phase occurring near the end of an economic-societal-political secular cycle. It’s important to note that Turchin and Nefedov’s work is on agrarian societies, so it may not be wholly applicable to today’s American urban society – but, being the undisciplined sort, I cannot help but note the interesting similarities. It suggests that we are, in fact, suffering from overpopulation, between an excess of skilled people, falling incomes, and rising rents.
I hope to put out a review of Secular Cycles in the near future, but, speaking as a complete newcomer to the subject, I will recommend its first Chapter for the serious reader who doesn’t mind slogging and thinking, or is familiar with the area. I think it’s fascinating. I’m in the midst of Chapter 2, but I suspect all of the Chapters following the first are case-studies studying the congruency of their theory with reality.
