Monopoly Power and Labor Abuses Go Hand-in-Hand

Upton Sinclair, author of “The Jungle,” wrote that when writing his novel critiquing the Gilded Age meatpacking industry, he aimed for America’s heart but hit its stomach. Indeed, though the novel centers on the struggles of an immigrant worker as he navigates low-wage and deadly jobs, it was the newly formed Federal Trade Commission that sprung into action to investigate the industry — specifically, allegations of price fixing at both the farmgate and the supermarket. 

Today, after decades of corporate and judicial attacks on workers, public attention to monopoly power is finally centering economic justice and workers rights. Last year, the FTC convened a hearing on market power and competition in labor markets, and the Justice Department plans on following suit with a hearing of its own next week.   

Recent academic and policy research has revealed that labor markets simply aren’t competitive. Between the pervasive use of no-poach agreements made by employers and noncompete clauses in contracts, illegal collusion to set wages, and the high costs of job searches, workers face significant employer power. Meanwhile, a growing body of research has found considerable concentration in certain labor markets, which is associated with lower wages and benefits. All of these factors contribute to labor market monopsony—a condition under which workers have few choices between employers, resulting in employer power.

While the full scope and implications of labor market concentration has yet to be revealed, the impact of outsized employer power is felt acutely by workers across the country. In a recent report from the Center for American Progress, case studies of two modern company towns reveal the profound impact on not only wages, but benefits, worker autonomy, and workplace safety. 

These company towns are the products of intentional business and policy decisions that leave economically depressed or rural areas dependent on a few major employers. For example, in the mid-20th century, meatpacking plants relocated from cities to rural areas to cut labor costs and replace their unionized workforce with workers willing to accept lower pay on account of the lack of economic opportunity. This kind of domestic outsourcing to right-to-work states and states with lower minimum wages is now common practice. Still other company towns result from depressed areas that rely on local and state incentives to entice businesses to locate there — an unsustainable and expensive economic development strategy that leaves communities dependent on multinational corporations that may threaten to leave at any point. 

Robust antitrust policy and enforcement is crucial to a democratic society and an economy with broad-based economic power and opportunity. In addition to adhering to strict structural presumptions against mergers and acquisitions, antitrust enforcers should apply stricter scrutiny to requests made by corporations with a documented history of labor abuse in the U.S. and abroad. At the state and federal levels, officials should aggressively enforce existing protections for workers against wage-fixing and no-poach agreements.   

Leveling the economic playing field for American families, however, requires more than breaking up corporate power—it must be accompanied by policies to promote worker power. By removing barriers to worker organizing and promoting new forms of collective bargaining like wage boards, workers can use countervailing power to resist the downward pressure on wages, benefits, and working conditions associated with labor market concentration. 

Raising federal and international labor standards is another, more direct way of tackling employer power. A higher federal minimum wage—indexed to inflation—will reduce the incentive of firms to outsource their operations to low-wage states, especially when paired with international trade agreements with robust labor standards. In fact, labor market monopsony power’s ability to suppress wages below the competitive level may be one reason that minimum wage increases have resulted in minimal job losses—firms weren’t paying workers the real value of their labor.

Concentrated corporate power poses a threat to our economy, planet, and democracy. Policy decisions over the last several decades have increasingly tilted the field of play in favor of corporations and against American workers. In order to address income inequality, policymakers and enforcers must at once halt the march toward increasing corporate power and lift up the efforts of workers, farmers, and small business owners to exercise collective power and receive their fair share. 

Zoe Willingham is the research assistant for Economic Policy at American Progress, where she studies economic concentration and antitrust policy, with an eye toward its impacts on workers, farmers, and small businesses.

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