Abstract

Excerpted From: Warren Grimes, Correcting Antitrust Monopsony Theory and Addressing Anticompetitive Conduct in Low-skill Labor Markets, 64 Santa Clara Law Review 417 (2023-2024) (244 Footnotes) (Full Document)

A critical unresolved problem in the United States is the inadequate compensation and abuse of many low-skill laborers. The problem is longstanding but has become more acute as the nation faces increasing income inequality. Low-income and oppressed employees include food and restaurant employees, farm workers, meatpacking workers, truck drivers, housekeepers for the hotel and motel industry, caregivers, franchisees and their employees, and gig economy workers. Antitrust law is currently part of the problem but could be a significant part of the solution. A vital first step lies in addressing the classic definition of monopsony power to make it consistent with market realities. The static monopsony definition assumes that the labor supply is somewhat elastic and that an employer cannot significantly change the available labor supply. Applying this assumption, when suppressing input prices, the employer must reckon with a decreased supply of input labor. Historically, that has not been the case for most low-end labor markets, and this reality seems unlikely to change.

More so than other labor markets, the supply curve for the low-skill labor market is likely to be inelastic. Moreover, employers have options for expanding the supply of unskilled and other low wage workers and can use various tactics to lock them into a job. Recognizing this reality can help clear the path for meritorious antitrust suits against abusive employers. In addition, antitrust must allow workers, including those deemed independent contractors, to exercise countervailing power. To achieve this, reasonable collective actions by employees must be shielded from antitrust claims of an unlawful conspiracy. The federal antitrust agencies should also consider guidelines or rules that protect worker choice and voice through appropriate monopsony claims under the Sherman Act.

I begin by examining the economic theory of monopsony and its disconnect with the realities of low-end labor markets. Part II examines the historical record of worker exploitation in North America, the responses to that exploitation, and contemporary examples of worker exploitation. Part III provides an overview of a modified monopsony definition as it applies to low-skill labor markets. Part IV addresses approaches that would remove antitrust as an obstacle and make it part of the solution to protect vulnerable low skill workers.

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Political realities, along with economic theory that does not adequately account for market realities, may explain why courts, academics, and practicing lawyers have been slow to extend antitrust protection to vulnerable low-skill workers. The former Chief Justice of the Wisconsin Supreme Court, when asked about the treatment of COVID-ridden workers in a meatpacking plant in her state, remarked that the afflicted workers weren't “regular folks.” Indeed they are not. These workers are disadvantaged and typically without effective political voice. Problematic labor markets in which workers are inadequately paid and often abused have long been and remain a core problem in the United States. Their oppressive treatment contributes to a worsening trend of economic inequality in the United States and imposes external costs on society.

Antitrust offers no comprehensive solution to these problems but can meaningfully contribute to better outcomes. Antitrust should recognize that monopsony abuses should be cognizable under antitrust law regardless of the downstream impact on consumers. In low-skill labor markets, employers are often able to increase labor supply while still suppressing wages and forcing stressful and dangerous working conditions on employees. Monopsony theory must reflect this reality.

Antitrust should remove the Section 1 Sherman Act barrier to collective action by employees who could substantially benefit through the exercise of countervailing power. That could occur through Supreme Court reevaluation of precedent or through legislation. Allowing workers to exercise a reasonable degree of countervailing power is the best approach for addressing worker abuse without undue involvement of government regulators.

Last, the antitrust agencies should explore guidelines or rules that shape in a constructive manner the evolving antitrust law governing labor market monopsony power. That process has already begun with federal agency recognition of per se treatment of no-poach agreements and more attention to seller-side issues in merger enforcement. There is still much to be done, including easing the path for Section 2 Sherman Act enforcement against monopsony abuse that squelches worker choice and worker voice. The guiding principle should be Adam Smith's vision of preferred societal outcomes for all players in the market system when the competitive process protects all participants from market power abuse.