A slate of President Joe Biden’s Cabinet members met Monday afternoon to make the case that a lack of job opportunities stems from corporate concentration and anti-competitive practices, resulting in wages that are stifled by up to 20%.
The word is monopsony. Defined as a market in which goods or services are offered by several sellers with only one buyer, the term appears 51 times in a Treasury Department report detailing the issue.
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“A competitive labor market is a key element of a well-functioning economy,” said Secretary of the Treasury Janet Yellen. “The Biden-Harris administration’s policies, taken together, will substantially boost competition and increase the relative bargaining power of workers. In turn, these reforms will meaningfully raise wages and boost the well-being for workers in markets around the country.”
In contrast to a monopoly, with one seller dominating supply, in a monopsony, a single buyer dominates demand. The White House argues that large and consolidated employers such as Amazon or Walmart can represent a kind of monopsony that limits employment options for Americans. The result is lower wages, a lack of options, and no opportunity for advancement.
“These conditions cumulatively yield an uneven market where employees often have more leverage than workers,” said Yellen.
The Treasury Department’s report holds that the American labor market is far from a model of perfect competition and as a result holds back the entire economy by inhibiting innovation, increasing prices, and curbing economic growth.
Specific issues that hurt workers, per the administration, include noncompete agreements, “misclassification” of employees as independent contractors to avoid paying for benefits, and the decline of unionization, which leaves workers with less bargaining power.
The report stems from a July executive order that tasked the Treasury, along with the departments of Justice and Labor and the Federal Trade Commission, with examining the issue.
The heads of each department spoke during a Monday afternoon meeting, and workers joined to show how problems outlined in the report affected them. One had been harmed by a noncompete clause, one by a nondisclosure agreement, one by being misclassified as an independent contractor, and one by industry consolidation.
“Simply put, these are barriers to the American dream,” said Attorney General Merrick Garland.
The report says 20% of American workers are subject to noncompete clauses, and up to 40% have worked under a nondisclosure agreement. Consolidation can be a labor issue when a single employer dominates an industry. For example, if one hospital system owns all of the local hospitals, it will be difficult for nurses to find jobs elsewhere.
Solutions the White House wants to see include increasing antitrust enforcement, which is a specialty of FTC Chairwoman Lina Khan. While still a law student, Khan made her name among advocates with a paper titled “Amazon’s Antitrust Paradox” that examines how the company’s size and wide diversity of operations hurt workers and the wider economy.
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The FTC and Justice Department say they will step up enforcement of existing antitrust laws and protections that prevent employees from being classified as independent contractors. Other proposed solutions include reducing occupational licensing requirements, banning or limiting the use of noncompete agreements, blocking mergers that would limit choice for workers, and making it easier to unionize.
“In recent decades, the balance of power has tilted against the worker,” said Secretary of Labor Marty Walsh. “The people in this room, and the president and vice president, are certainly on a pathway to change that.”
