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Countering Employer Monopsony Power With Fundamental Labor Rights

 |  January 28, 2022

By: Peter Norlander (Pro Market)

Labor policies grounded in the fundamental rights of workers can reinforce the aims of a proposed labor antitrust agenda by limiting a firm’s ability to abuse market power. Drawing from studies of guest worker programs that grant firms control over the sponsorship of foreign nationals to work legally in the US, policymakers and economists should consider non-discrimination law, wage standards, and bolstering worker’s ability to quit to reduce a firm’s ability to exercise monopsony power in labor markets.

s antitrust experts consider addressing firm power in the labor market, the discourse rarely differentiates between institutional contexts. Focusing on employer concentration and imagining generic interventions to reduce monopsony power for a hypothetical single US labor market could miss a key point about the complex set of institutions and policy choices that affect how a firm with market power uses that power. While it may not ever be possible to completely eliminate monopsonistic power in the labor market, expert agencies working in a particular context as part of a “whole of government” approach that Hiba Hafiz has described are necessary to combat the exercise of monopsony power.

Consider the situation of guest workers on temporary visas in the US. For some of these workers, quitting ends their legal right to remain in the US. For others, employers pay “hiring taxes” when they bring foreign nationals to the US, and “quitting” taxes when poaching a worker from another employer. Judicial interpretations have blessed price-fixing employer cartels to set wages for temporary migrant workers, and while federal regulations often require they be paid a minimum of the 50th percentile of the relevant labor market, authority and resources to enforce regulations are lacking. With this background, it is no wonder that guest worker programs raise concerns about employer power in the labor market.

Critics have called these “monopsony visas,” in the words of Heidi Shierholz of the Economic Policy Institute, and a “subsidy” to employers, in the words of Milton Friedman. In a series of papers over several years on guest worker mobility, employer strategy and guest worker hiring, and antitrust concerns and visa programs, I and others have studied firm monopsony power over these workers, and how different sources of labor market power might have different remedies and consequences…