Monopsony in the US Labor Market
Chen Yeh, Claudia Macaluso, Brad Hershbein
American Economic Review · 2022 · Volume 112 · Issue 7
Abstract
This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant's marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since.
Keywords
Human Capital, Skills, Occupational Choice, Labor Productivity, Wage Level and Structure, Wage Differentials, Wages, Compensation, and Labor Costs: Public Policy, Monopsony, Segmented Labor Markets, Oligopoly and Other Imperfect Markets, Industry Studies: Manufacturing: General
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