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Summer 2023

ISSN 0890-913X

Volume 38, Number 2

The Death of Labor Market Competition Has Been Greatly Exaggerated

Timothy Perri Perri, Appalachian State University

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TheJournalofPrivateEnterprise38(2),2023,39-54TheDeathofLaborMarketCompetitionHasBeenGreatlyExaggeratedTimothyPerri*AppalachianStateUniversityUnitedStatesofAmericaAbstractIcritiquerecenttheoreticalandempiricalresearchthatsuggeststhatlabormarketsarenotnearlyascompetitiveashasgenerallybeenassumed.Iarguethatno-poachingagreementsandcovenantsnottocompetemayreducethenumberofcompetitorsandthusthewage,butfirmsarestillwagetakers.Thismeanstheminimumwagewillnotincreaseemployment.JELCodes:J31,J42Keywords:monopsony,marketconcentrationIntroductionMonopsonyhasbeenrediscoveredinthelastseveraldecades.Onedetailedanalysis,inabookbyManning(2003),arguesthatmonopsonyispervasiveinlabormarkets.ThevastnessofmodernlabormarketssuggeststhatManning’sclaimisimplausible,althoughKruegerandAshenfelter(2022)arguethatagreementsnottopoachtheemployeesofcompetitorsofferanexplanationformonopsony.OtherrecentresearchsuggeststhatthelevelofmonopsonypowerinUSlabormarketsissignificant.Anadditionalissueiswhetherlabormarketmonopsonyexplainsthefindingthattheeffectsoftheminimumwageonemploymentarenon-negative(Card2022).H.GreggLewis,thefatherofmodernlaboreconomics(Hamermesh2020),argueddecadesagothatmonopsonyisonlyinvokedindiscussionsoftheminimumwageandisthesoleargumentfortheminimumwage(Lewisn.d.).1Todaymonopsonyisinvokedtoexplainlowearningsofsomegroups.*Ithankananonymousrefereeforcommentsthatgreatlyimprovedthepaper.IalsothankMikeGibbsandDonParsonsforcommentsonanearlierversionofthepaper.1Lewis(n.d.)isasetoflecturenotesfromthegraduatelabor-economicscourseLewistaughtattheUniversityofChicago.Theindividualwhocompiledthenotesisunknowntome.Theyarelikelyfromthelate1960s.

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Title	The Death of Labor Market Competition Has Been Greatly Exaggerated
Authors/Creators:	Timothy Perri Perri, Appalachian State University
Year:	2023
Volume:	38
Number:	2
Pages:	39 - 54
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	monopsony, market concentration

Citation:
Perri, Timothy Perri / 2023. "The Death of Labor Market Competition Has Been Greatly Exaggerated." The Journal of Private Enterprise, 38(2): 39-54.