Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?

Benmelech, Efraim; Bergman, Nittai; Kim, Hyunseob

doi:10.3386/w24307

Cited by 181 publications

(199 citation statements)

References 25 publications

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“…Overall, while labour market concentration does appear to decrease wages, the impact seems to be relatively small. In a study covering the US manufacturing sector over three decades, Benmelech et al (2018) find similarly significant but economically small effects on wages from labour market concentration. Labour market concentration also does not seem to contribute substantially to inequality, explaining a negligible amount of the firm wage dispersion (R 2 < 0.05), explaining very little of the between-group wage gaps (see Table 3), and sorting worker effects along HHI in a much less polarized way than along profits (see the lower panel of Figure B4).…”

Section: Labour Concentration Monopsonymentioning

confidence: 93%

“…Key studies using the spatial approach includeBenmelech et al (2018),Rinz (2018), andAzar et al (2017), and those using the separations approach include Webber (2015),Hirsch et al (2018), andDepew and Sørensen (2013). All of these use the worker's wage, rather that the firm wage premium.4 The other two areFleisher and Wang (2004), who find the firm labour supply elasticity for China by simply regressing employment on wages, andOgloblin and Brock (2005), who estimate the gap between productivity and wages by 'stochastic frontier estimation' for Russia.…”

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confidence: 99%

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The wage-setting power of firms: Rent-sharing and monopsony in South Africa

Bassier¹

2019

WIDER Working Paper

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Abstract: Using administrative tax records from South Africa for the period 2011-14, I find that firm wage premia explain 25 per cent of the total wage variance, 60 per cent of the gender wage gap, and 40 per cent of the gap between workers in the middle and the bottom of the income distribution. Next, I argue that in contrast to the rent-sharing literature, many studies of monopsony fail to use firm-level wage variation. I address this by using the estimated firm wage premia to estimate how wages are related to rent-sharing and monopsony power. I find that the average worker switching from a firm in the 25th percentile to the 75th percentile in profitability is paid 32 per cent more; and that the same switch across the distribution of monopsony, as measured by the Herfindahl-Hirschman Index in industry-by-local labour market hires, decreases wages by 10 per cent on average. When monopsony is measured using a separations approach, I find a labour supply elasticity of 0.75, suggesting substantial wage-setting power. Finally, I provide additional evidence supporting the applicability of the monopsony model in explaining these results. Differences in labour supply elasticities across gender and income groups account remarkably well for the corresponding average gaps in firm wage premia, and unions substantially increase rent-sharing in firms.

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Section: Labour Concentration Monopsonymentioning

confidence: 93%

mentioning

confidence: 99%

The wage-setting power of firms: Rent-sharing and monopsony in South Africa

Bassier¹

2019

WIDER Working Paper

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“…Meanwhile, Benmelech et al . () measure monopsony power in terms of an employment‐based Herfindahl–Hirschman index (HHI) of firms in the US local labour markets, showing this has increased between 1977–1981 and 2002–2009, their period of study. Azar et al .…”

Section: Research On Individual Drivers Of Inequalitymentioning

confidence: 99%

The Drivers of Income Inequality in Rich Countries

Nolan

Richiardi

Valenzuela

2019

Journal of Economic Surveys

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Rising income inequality has recently come centre‐stage as a core societal concern for rich countries. The diagnosis of the forces driving inequality upwards and their relative importance remain hotly contested, notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices. This survey provides a critical review and synthesis of recent research. The focus is on income inequality across the entire distribution, rather than only on what has been happening at the very top. We pay particular attention to include what has been learned from the analysis of micro‐data, to ensure that the coverage is not unduly US‐centric and to analyses of the interrelations between the different drivers of inequality. The marked differences in inequality trends across countries and time periods reflect how global economic forces such as globalization and technological change have interacted with differing national contexts and institutions. Major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades.

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“…In most OECD countries, the large majority of younger adults (age [25][26][27][28][29][30][31][32][33][34] had at least an upper secondary qualification in 2017. The proportion of [25][26][27][28][29][30][31][32][33][34] year olds with tertiary education also increased, from 34% in 2007 to 44% in 2017 on average across the OECD. In just a few decades, upper secondary schooling has been transformed from a vehicle for upward social mobility into a minimum requirement for life in modern society (OECD, 2018a).…”

Section: Trends In Education and Ageingmentioning

confidence: 99%

Outlook: Towards an OECD-IIASA Multiannual Work Programme

2020

New Approaches to Economic Challenges

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Photo credits: Cover PrefaceIn policymaking, we hear the word "system" all the time. The economic system. The education system. The financial system. The political system. The social system… However, we rarely hear the word system attached to the word "approach". But unless we adopt a systems approach, unless we employ systems thinking, we will fail to understand the world we are living in. Our world is made up of complex systems, systems of systems interacting with each other, and changing each other by that interaction and the links between them.The global economy now has a greater number of links than ever before. The global nature of supply chains; new ways of exchanging goods, services and ideas; increasing migration; and ever-greater digitalisation, all increase our global connectedness. Such interconnectedness, in turn, gives rise to complexity, and this can be good or bad. However, within mainstream economics, the understanding of why and when interconnectedness may increase stability or instability has remained fragmented.Complexity science helps us to understand the main features of the most important systems we have to deal with. Features such as emergence, when the overall effect of individuals' actions is qualitatively different from what each of the individuals is doing. Radical uncertainty is another important aspect. It describes surprises-outcomes or events that are unanticipated, that cannot be put into a probability distribution because they are outside our list of things that might occur.But despite radical uncertainty and the unanticipated, the future is born by anticipation. We take decisions and perform actions to influence the future, as individuals, societies or governments. And the imagined, probable, or expected outcomes influence our decisions and actions in the present. Even things that may never happen, or will only happen decades from now, can have an impact on what we do today. That is why we plan our day, buy insurance, and pay into pension funds. That is why we try to forecast everything from GDP to the weather to the results of elections or football matches.Of course, not all our decisions about the future are in tune with what economic rationality would like us to do. We promote evidence-based decision-making, but of course there is no evidence about the future. Moreover, experience shows that simply extrapolating from the past can be ridiculous, dangerous or at best misguided.A complexity approach helps us to avoid these errors. We are dealing with a world characterised by nonlinearities, tipping points, and asymmetrical relations where a small cause can have a big effect. In a systems approach, global issues need global solutions. Environmental problems do not respect borders. You need to import some goods and services to be able to export others. The digital revolution is making it hard to define what the "domestic" in "gross domestic product" is. Growing inequalities are creating discontent.If we are to tackle these issues, governments must change the ways in which they des...

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Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?

Cited by 181 publications

References 25 publications

The wage-setting power of firms: Rent-sharing and monopsony in South Africa

The wage-setting power of firms: Rent-sharing and monopsony in South Africa

The Drivers of Income Inequality in Rich Countries

Outlook: Towards an OECD-IIASA Multiannual Work Programme

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