Economist Discusses Monopsony Before Congress: What You Need To Know

On Wednesday, Washington Center for Equitable Growth interim chief economist Kate Bahn discussed a topic that has recently gotten more attention: monopsony.

Speaking on behalf of her think tank, Bahn addressed the Joint Economic Committee on how monopsonies — essentially having only one buyer of a good or service, or the inverse of monopoly — are helping expand inequality in the U.S.

Why It Matters: Monopsonies prevent the free market from operating freely, fairly and competitively as employers have disproportionate power over where workers invest their labor and how much they earn.

In general, this hurts workers by pushing wages down and stifles competition in the market.

Bahn discussed how most local labor markets in the U.S. have few employers competing for workers, giving employers outsized power on firing and wage-setting tendencies.

She cited a study explaining how more than 10% of American workers experience wage suppression by 2% or more. Rural residents and women have been disproportionately hurt by these policies, notes Bahn.

What Can Be Done: While there is no panacea for the issue, Bahn said anti-trust and anti-competition policies can be best leveraged to reduce inequality, giving workers more agency and making markets fairer.

“Instituting policies that increase the outside options available to workers, including policies that reduce search costs or make it easier for workers to change jobs, is a necessary step toward limiting the ability of employers to suppress wages and take advantage of workers,” she said to Congress.