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How Antitrust Failed Workers
A trenchant account of an unacknowledged driver of inequality and wage stagnation in America: the failure of antitrust law to prevent the consolidation of employers, who use their market power to suppress wages.
Since the 1970s, Americans have seen inequality skyrocket--and job opportunities stagnate. There are many theories of why this happened, including the decline of organized labor, changes in technology, and the introduction of tax policies that favored the rich. A missing piece of the puzzle is the consolidation of employers, which has resulted in limited competition in labor markets. This should have been addressed by antitrust law, but was not. In How Antitrust Law Failed Workers , Eric Posner documents the failure of antitrust law to address labor market concentration. Only through reforming antitrust law can we shield workers from employers' overwhelming market power.
Antitrust law is well-known for its role in combatting mergers, price-fixing arrangements, and other anticompetitive actions in product markets. By opposing these practices, antitrust law enhances competition among firms and keeps prices low for goods and services. Less well-known, antitrust law also applies to anticompetitive conduct by employers in labor markets, which pushes wages below the competitive rate. Yet there have been few labor market cases or enforcement actions, and almost no scholarly commentary on the role of antitrust law in labor markets. This book fills the gap. It explains why antitrust law has failed to address labor market concentration, and how it can be reformed so that it does a better job.
Essential reading for anyone interested in fighting economic inequality, How Antitrust Failed Workers also offers a sharp primer on the true nature of the American economy―one that is increasingly uncompetitive and tilted against workers.
Since the 1970s, Americans have seen inequality skyrocket--and job opportunities stagnate. There are many theories of why this happened, including the decline of organized labor, changes in technology, and the introduction of tax policies that favored the rich. A missing piece of the puzzle is the consolidation of employers, which has resulted in limited competition in labor markets. This should have been addressed by antitrust law, but was not. In How Antitrust Law Failed Workers , Eric Posner documents the failure of antitrust law to address labor market concentration. Only through reforming antitrust law can we shield workers from employers' overwhelming market power.
Antitrust law is well-known for its role in combatting mergers, price-fixing arrangements, and other anticompetitive actions in product markets. By opposing these practices, antitrust law enhances competition among firms and keeps prices low for goods and services. Less well-known, antitrust law also applies to anticompetitive conduct by employers in labor markets, which pushes wages below the competitive rate. Yet there have been few labor market cases or enforcement actions, and almost no scholarly commentary on the role of antitrust law in labor markets. This book fills the gap. It explains why antitrust law has failed to address labor market concentration, and how it can be reformed so that it does a better job.
Essential reading for anyone interested in fighting economic inequality, How Antitrust Failed Workers also offers a sharp primer on the true nature of the American economy―one that is increasingly uncompetitive and tilted against workers.
224 pages, Hardcover
Published September 10, 2021
9 people are currently reading
221 people want to read
About the author
Eric A. Posner
35 books85 followersEric Posner is the Kirkland & Ellis Professor of Law at The University of Chicago.
His books include Law and Social Norms (Harvard 2000); Chicago Lectures in Law and Economics (Foundation 2000) (editor); Cost-Benefit Analysis: Legal, Economic, and Philosophical Perspectives (University of Chicago 2001) (editor, with Matthew Adler); The Limits of International Law (Oxford 2005) (with Jack Goldsmith); New Foundations of Cost-Benefit Analysis (Harvard 2006) (with Matthew Adler); and Terror in the Balance: Security, Liberty, and the Courts (Oxford 2007) (with Adrian Vermeule). He is also an editor of the Journal of Legal Studies. He has published articles on bankruptcy law, contract law, international law, cost-benefit analysis, constitutional law, and administrative law, and has taught courses on international law, foreign relations law, contracts, employment law, bankruptcy law, secured transactions, and game theory and the law. His current research focuses on international law, immigration law, and foreign relations law. He is a graduate of Yale College and Harvard Law School.
His books include Law and Social Norms (Harvard 2000); Chicago Lectures in Law and Economics (Foundation 2000) (editor); Cost-Benefit Analysis: Legal, Economic, and Philosophical Perspectives (University of Chicago 2001) (editor, with Matthew Adler); The Limits of International Law (Oxford 2005) (with Jack Goldsmith); New Foundations of Cost-Benefit Analysis (Harvard 2006) (with Matthew Adler); and Terror in the Balance: Security, Liberty, and the Courts (Oxford 2007) (with Adrian Vermeule). He is also an editor of the Journal of Legal Studies. He has published articles on bankruptcy law, contract law, international law, cost-benefit analysis, constitutional law, and administrative law, and has taught courses on international law, foreign relations law, contracts, employment law, bankruptcy law, secured transactions, and game theory and the law. His current research focuses on international law, immigration law, and foreign relations law. He is a graduate of Yale College and Harvard Law School.
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Displaying 1 - 6 of 6 reviews
June 4, 2022
This is a must read for anyone interested in labor markets
The book starts with an excellent and concise review of the empirical literature on the prevalence of mobilising power in the US. Acknowledging the reality that the labor market is way less competitive than originally thought by economists, and that employers hold a lot more power than usually thought, Posner makes the case for reform.
The argument from Planet can be divided in two. First, existing antitrust regulations that are commonly applied in product markets should be more vigorously applied in labor markets (for example, analyzing the effects of mergers and deterring them if they lead to more concentration, non-violent agreements, cartelization among employers). And secondly, the existing antitrust regulation should be updated to deal with several changes in labor markets.
A major strength of the book is that it recognizes that antitrust legislation is not a silver bullet. It can and should help to diminish monopsony power derived from non-competitive behaviors by employers, but it will be ineffective when dealing v with mobilising power derived from structural elements of the labor market, such as search costs or the type of work performed. For those cases, Posner argues, we need a strong labor regulation that protects workers from the abuse of employers due to the asymmetric relationship in the workplace.
Extremely well researched and written, I highly recommend it.
The book starts with an excellent and concise review of the empirical literature on the prevalence of mobilising power in the US. Acknowledging the reality that the labor market is way less competitive than originally thought by economists, and that employers hold a lot more power than usually thought, Posner makes the case for reform.
The argument from Planet can be divided in two. First, existing antitrust regulations that are commonly applied in product markets should be more vigorously applied in labor markets (for example, analyzing the effects of mergers and deterring them if they lead to more concentration, non-violent agreements, cartelization among employers). And secondly, the existing antitrust regulation should be updated to deal with several changes in labor markets.
A major strength of the book is that it recognizes that antitrust legislation is not a silver bullet. It can and should help to diminish monopsony power derived from non-competitive behaviors by employers, but it will be ineffective when dealing v with mobilising power derived from structural elements of the labor market, such as search costs or the type of work performed. For those cases, Posner argues, we need a strong labor regulation that protects workers from the abuse of employers due to the asymmetric relationship in the workplace.
Extremely well researched and written, I highly recommend it.
September 6, 2022
The field of antitrust is getting much more attention now because of the presence of large companies that hold some monopoly power (Google, Amazon, Walmart, etc.). However, what is largely ignored both by the public and the DOJ is the prevalence of monopsony power. A monopsony is when there is one BUYER and multiple sellers (a monopoly is the opposite: one SELLER and multiple buyers). A market where the buyer has all the power produces just as bad a result, and we see those bad results in the labor market.
Employers are buyers of labor and workers are sellers of their labor in the labor market. When there are few employers and multiple workers, the employers have monopsony power.
Employers strive to get monopsony power in many ways. Mergers with other companies, non-compete contracts with new employees, predatory pricing and hiring, restrictions on employees' freedom to disclose wage and benefit information, no-poaching agreements, misclassifying employees as contractors, and more. All of these anti-competitive practices give the employer more bargaining power in the labor market, which in turn lowers the wages of workers in that labor market.
No one can say Poser's book isn't relevant. Monopsony power has increased over the decades as anti-trust enforcement has lacked in this area, as well as the long-term trend of the decline of union membership. This has led to stagnant wages and a decrease in labor mobility for workers over the past 30 years as they have seen their bargaining power stripped away.
Posner proposes an increase in antitrust enforcement on monopsonies to counteract this labor market imbalance, but worries technology will give employers more avenues to suppress workers' wages.
This is an incredibly important book on an incredibly important subject, and I agree with the author's claims wholeheartedly. But the book does not flair up the subject at all. It is cut and dry. This writing style is efficient and communicates a message with objectivity. However, for a subject that touches on power imbalances, and worker exploitation, I hoped for more heart behind the research.
Employers are buyers of labor and workers are sellers of their labor in the labor market. When there are few employers and multiple workers, the employers have monopsony power.
Employers strive to get monopsony power in many ways. Mergers with other companies, non-compete contracts with new employees, predatory pricing and hiring, restrictions on employees' freedom to disclose wage and benefit information, no-poaching agreements, misclassifying employees as contractors, and more. All of these anti-competitive practices give the employer more bargaining power in the labor market, which in turn lowers the wages of workers in that labor market.
No one can say Poser's book isn't relevant. Monopsony power has increased over the decades as anti-trust enforcement has lacked in this area, as well as the long-term trend of the decline of union membership. This has led to stagnant wages and a decrease in labor mobility for workers over the past 30 years as they have seen their bargaining power stripped away.
Posner proposes an increase in antitrust enforcement on monopsonies to counteract this labor market imbalance, but worries technology will give employers more avenues to suppress workers' wages.
This is an incredibly important book on an incredibly important subject, and I agree with the author's claims wholeheartedly. But the book does not flair up the subject at all. It is cut and dry. This writing style is efficient and communicates a message with objectivity. However, for a subject that touches on power imbalances, and worker exploitation, I hoped for more heart behind the research.
October 13, 2021
A very unique book in terms of how it approaches the whole "monopoly problem".
Eric Posner starts by introducing a term known as labor power, the ability of employers to set wages below worker's marginal revenue product. While product market power is the power to raise prices above the competitive rate, labor market power is the power to pay wages below the competitive rate.
The authors argument is that "antitrust law should police labor markets just as it policies product markets. Indeed, the case for antitrust law enforcement in labor markets is stronger than in product markets."
Various causes of labor monopolization exist, but the one the book focuses on is "labor market concentration", which is the "concentration of labor markets as a result of economies of scale, network effects, fixed cost, and other facts. When one firm, or a small # of firms, are able to hire from a single labor market (generally a restricted geographical area) they have market power.
The firm is able to take advantage of this power by lowering wages and getting workers to sign non-compete agreements (which prevents them from working for competitors). As a result, this prevents other companies, of a similar nature, from being able to diversity the market. Moreover, this prevents employees, that are able to learn/develop leadership skills/talents under said company, from starting their own company in the area.
The author goes on to showcase the negative economic effects that stem from this phenomenon. He also goes on to critique/advocate for various solutions to this problem. I like how the author also takes time to break down antitrust law/cases to show the reader why this problem isn't being addressed. FOr various reasons, such as the fact that there isn't nearly as much info. on labor monopolies, as there is product monopolies, labor monopolies are rarely broken up.
Overall this was a very very informative read. It just wasn't as entertaining as I would have hoped it to be. And while the overall topic was interesting, various portions in the book came across as dense/boring for me to read.
However, I learned a lot...and my mind has totally shifted in terms of how i view the whole "monopoly problem".
So yeah i would recommend this.
4.5/5 in terms of the learning experience.
3/5 in terms of the entertainment experience.
Eric Posner starts by introducing a term known as labor power, the ability of employers to set wages below worker's marginal revenue product. While product market power is the power to raise prices above the competitive rate, labor market power is the power to pay wages below the competitive rate.
The authors argument is that "antitrust law should police labor markets just as it policies product markets. Indeed, the case for antitrust law enforcement in labor markets is stronger than in product markets."
Various causes of labor monopolization exist, but the one the book focuses on is "labor market concentration", which is the "concentration of labor markets as a result of economies of scale, network effects, fixed cost, and other facts. When one firm, or a small # of firms, are able to hire from a single labor market (generally a restricted geographical area) they have market power.
The firm is able to take advantage of this power by lowering wages and getting workers to sign non-compete agreements (which prevents them from working for competitors). As a result, this prevents other companies, of a similar nature, from being able to diversity the market. Moreover, this prevents employees, that are able to learn/develop leadership skills/talents under said company, from starting their own company in the area.
The author goes on to showcase the negative economic effects that stem from this phenomenon. He also goes on to critique/advocate for various solutions to this problem. I like how the author also takes time to break down antitrust law/cases to show the reader why this problem isn't being addressed. FOr various reasons, such as the fact that there isn't nearly as much info. on labor monopolies, as there is product monopolies, labor monopolies are rarely broken up.
Overall this was a very very informative read. It just wasn't as entertaining as I would have hoped it to be. And while the overall topic was interesting, various portions in the book came across as dense/boring for me to read.
However, I learned a lot...and my mind has totally shifted in terms of how i view the whole "monopoly problem".
So yeah i would recommend this.
4.5/5 in terms of the learning experience.
3/5 in terms of the entertainment experience.
October 13, 2021
This is a brief but sprightly tour through the latest economic and legal thinking on labor monopsony, or the idea that businesses tend to have substantial power over workers, due to limited competition for labor, and can therefore either collude or use raw monopoly power on their own to suppress wages. I wasn't entirely convinced, as some parts were weakly supported, but most of it was informative.
As the book notes, the 2010 revelation that Apple, Google, and other Silicon Valley companies had signed "no poaching" agreements with each other (they latter settled with the government) gave people pause about the potential for collusion outside of "product markets." The 2014 revelation that a lower-end employer like sandwich maker Jimmy Johns made their employees sign "no competes" to make it illegal for them to work in other sandwich shops, and that maybe 12% of all low-income workers were covered by such clauses, made the power of companies over later more clear. Posner has some interesting theories about how the dominance of Industrial Organization economics in antitrust has kept labor economics out of the field, and about how the problems of certifying workers as classes, and the small gains of local lawsuits, has kept workers out of class action antitrust cases, but he also goes off on speculative tangents where he seems to want to remake antitrust law and theory all on his own.
Posner's suggestions for reform are often sensible. Give more scrutiny to "no competes" under antitrust, and pay attention to labor monopsony in merger analysis. But much of the book wants to make it seem like companies are always trying to grind the face of their workers, which ignores how companies have to invest and retain workers. Some more balance in the book, and its citations, would have helped make a stronger case.
As the book notes, the 2010 revelation that Apple, Google, and other Silicon Valley companies had signed "no poaching" agreements with each other (they latter settled with the government) gave people pause about the potential for collusion outside of "product markets." The 2014 revelation that a lower-end employer like sandwich maker Jimmy Johns made their employees sign "no competes" to make it illegal for them to work in other sandwich shops, and that maybe 12% of all low-income workers were covered by such clauses, made the power of companies over later more clear. Posner has some interesting theories about how the dominance of Industrial Organization economics in antitrust has kept labor economics out of the field, and about how the problems of certifying workers as classes, and the small gains of local lawsuits, has kept workers out of class action antitrust cases, but he also goes off on speculative tangents where he seems to want to remake antitrust law and theory all on his own.
Posner's suggestions for reform are often sensible. Give more scrutiny to "no competes" under antitrust, and pay attention to labor monopsony in merger analysis. But much of the book wants to make it seem like companies are always trying to grind the face of their workers, which ignores how companies have to invest and retain workers. Some more balance in the book, and its citations, would have helped make a stronger case.
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December 8, 2021"An innovative analysis argues that antitrust law failed to prevent the consolidation of employers with the result that wages of workers have stagnated. The book shifts attention away from the usual focus of antitrust law, product markets, to the vitally important input market of labor, and it has momentous implications for the economy and income inequality."
- Thomas J. Miles, Dean, Clifton R. Musser Professor of Law and Economics
- Thomas J. Miles, Dean, Clifton R. Musser Professor of Law and Economics
February 5, 2022
Well researched and well argued book addressing a contentious economic / political issue.
Accessible for non-experts.
Likely won’t provide any new information to anyone familiar with the subject.
Accessible for non-experts.
Likely won’t provide any new information to anyone familiar with the subject.
Displaying 1 - 6 of 6 reviews