But whether antimonopsony is able fully to redistribute scarcity rents depends on whether the limit to its redistributive reach—the competitive price—is likely to allocate to workers and suppliers the lion’s share of those scarcity rents. Here antimonopsony comes up short. The most that antimonopsony can do is to drive prices up from the infracompetitive levels to which they have been pushed by monopsony power to the higher levels consistent with competitive markets. But, just as we saw in the case of sell-side markets, whether competitive pricing is likely to redistribute a great deal of wealth or just a little depends on the relationship between inframarginal sellers and the marginal seller. If sellers—in this buy-side context they are workers or suppliers—are highly differentiated in the quality of the products and services that they provide, or if some are able to provide those products or services at far lower cost than others, then the competitive price set by the marginal seller will be substantially above the costs of the inframarginal sellers and will leave inframarginal sellers with a large share of surplus. Because that surplus in buy-side markets is ultimately traceable to scarcity rents in sell-side markets, the competitive price will therefore redistribute to sellers—workers and suppliers—a large share of scarcity rents. If, by contrast, sellers are not highly differentiated—workers do not tend to have unique talents or skills and suppliers do not tend to sell differentiated products or to have radical cost advantages relative to each other—then there will be little difference between the cost of the marginal seller and those of the inframarginal sellers. The competitive price will, therefore, leave sellers with a small share of the surplus and hence redistribute to them a small share of the scarcity rents earned by firms in competitive markets. The trouble with contemporary antimonopsonism as applied to labor is that workers are not highly differentiated. The curse of labor is that it is not scarce. Celebrities and the occupants of the relatively small number of highly-skilled jobs aside, most work can be done by most people, after a bit of training.[1] And most workers have about the same basic needs—the same production cost for their services—consisting of a bit of food and shelter.[2] It follows that, celebrities and the highly-educated aside, no worker appropriates much in the way of surplus when wages are priced competitively. The marginal worker is only slightly less able to carry out his job, or needs only to be slightly better fed, than the inframarginal worker, and so the price necessary to get the marginal worker into the market is not substantially higher than the price needed to get any other worker into the market. As a result, workers, unlike their employers selling in product markets, can hardly turn a profit under competition, and so an antimonopsony policy that seeks to secure the competitive wage rate for workers will not go far toward ending inequality.[3]
Ramsi Woodcock, Antimonopolism as a Symptom of American Political Dysfunction 60–61 (2021).
Herein the argument that competition does a poor job of distributing surpluses to labor and, by extension, small suppliers.
In brief: The competitive wage must be low enough to be affordable by the marginal employer, but some employers, particularly those that appropriate large rents in product markets, can afford to pay much higher wages. In competitive labor markets, they don’t have to, and the money they save increases the wealth gap.
[1] See Elka Torpey and Audrey Watson, Education Level and Jobs: Opportunities by State : Career Outlook: U.S. Bureau of Labor Statistics, https://www.bls.gov/careeroutlook/2014/article/education-level-and-jobs.htm (last visited Nov. 14, 2021) (reporting that only 5% of jobs require an advanced degree).
[2] We think that we have greater needs—such as the ability to purchase a computer or television—only because our profits, despite being small in relation to those earned by employers, are large enough to allow most of us to afford these things, and so we have come to expect them. But were the wage to fall and squeeze these things out of our lives, we would still work to eat, and so these things are not strictly necessary to make us ready, willing, and able to work—which is the definition of cost in the economic sense. See Woodcock, The Antitrust Case for Consumer Primacy in Corporate Governance, supra note 43, at 1414. By contrast, we would not take a job that did not pay us enough to eat, for we are better off starving at our leisure than starving on the job.
[3] Antimonopsonists estimate, for example, that employer monopsony depresses wages by as much as 20%. See José Azar et al., Labor Market Concentration, J. Human Resources 1218, 1218 (2020). If one were generously to interpret a return to competitive wages as increasing, in the long run, the share of wealth controlled by the bottom 90% of Americans by 20%, entirely at the expense of the richest 1%, that bottom 90% would control a mere 30% of wealth and the richest 1% would continue to control 35% of the nation’s wealth. See The Distribution of Wealth in the United States and Implications for a Net Worth Tax, Equitable Growth (Mar. 21, 2019), http://www.equitablegrowth.org/the-distribution-of-wealth-in-the-united-states-and-implications-for-a-net-worth-tax/ (reporting that the bottom 90% control a quarter of national wealth and the top 1% control 40% of national wealth).