Employer Concentration and Outside Options
107 Pages Posted: 15 Jun 2020 Last revised: 26 Jan 2024
Date Written: January 25, 2024
We find that increases in employer concentration causally reduce wages, using a new instrument for employer concentration based on changes in large firms' national hiring patterns. We also show that measuring employer concentration within a single local occupation excludes important parts of workers' true labor markets. Moving from the median to the 95th percentile of employer concentration as experienced by workers causally reduces wages by 10.7 log points in low-outward-mobility occupations like registered nurses or security guards, and by 3 log points in high-outward-mobility occupations like bank tellers or counter attendants. We propose a new approach for defining mobility-adjusted labor markets, measuring employer concentration on clusters of local occupations identified through asymmetric mobility patterns (using new, highly granular data on occupational mobility from 16 million resumes). Overall, we estimate that around one in six U.S. workers face wage suppression of 2% or more as a result of employer concentration.
Keywords: monopsony, labor markets, concentration, outside options
JEL Classification: J31, J42, J62
Suggested Citation: Suggested Citation