Labor market concentration and competition in the United States have garnered renewed and well-deserved attention in recent years. Competitive labor markets are fundamental drivers of economic growth, worker well-being, and equality. Similar to the concentration seen in sales data, it is extensively documented that levels of concentration in the U.S. labor sector have been increasing at the national level.
A newly released working paper titled “Local and National Concentration Trends in Jobs and Sales: The Role of Structural Transformation” reaffirms these nationwide trends. The paper’s co-authors—David Autor at the Massachusetts Institute of Technology, Christina Patterson at the University of Chicago, and John Van Reenan at the London School of Economics—confirm a notable rise in concentration levels across all sectors, including manufacturing, retail trade, wholesale trade, services, utilities and transportation, and finance, both individually and collectively.
According to their calculations, sales concentration, assessed through a weighted average of the Herfindahl-Hirschman Index (HHI), a commonly used measure for market concentration, has surged by 53 percent, and employment concentration has increased by 68 percent in 2017, compared to figures from 1992. To provide perspective, a market transitioning from five companies of equal size to only three companies of equal size would experience a 63 percent increase in its HHI.
Furthermore, the paper delves into local concentration trends in job markets and sales, investigating whether these trends align with the national trajectory. These local trends are arguably more significant from a competition standpoint, as individuals generally prefer to shop and work in proximity to their residence, making competition in local markets highly relevant to their day-to-day lives and livelihoods…