Monopsony power suppresses wages across much of the U.S. economy, deepening income inequality.

Economist Joan Robinson first identified monopsony as employer dominance in labor markets, but it was long dismissed as rare. Recent research by Arindrajit Dube and others reveals monopsony power is widespread and key to understanding stagnant wages and labor market dynamics.

Monopsony arises when few employers compete for workers, creating concentrated labor markets roughly equivalent to having three employers. Factors like search frictions, job differentiation, and illegal no-poaching agreements—such as those uncovered between Apple and Google—further entrench employer wage-setting power. Studies by David Card and Alan Krueger challenged traditional views by showing minimum wage hikes do not necessarily reduce employment, renewing interest in monopsony. Wage disparities between similar companies, for example Target versus Walmart or UPS versus FedEx, illustrate this phenomenon. Movements to raise wages, including Amazon’s voluntary $15 minimum wage, are partial responses to this power imbalance.

Ongoing research and policy efforts aim to tackle monopsony power through revived collective bargaining and sectoral bargaining strategies.

While not specific to Montana, these national labor market trends may influence wage pressure and employer competition in the state’s diverse economic sectors, especially where population density limits employer options. Montana businesses could face incentives to evaluate wage-setting practices amid evolving regulatory and market conditions.

The hidden power keeping wages low
By NPR

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Employer Monopsony Power Has Driven Income Inequality Since 1980s