How Monopsony Impacts Older Women Workers

By Bahn, Kate | Generations, Fall 2019 | Go to article overview

How Monopsony Impacts Older Women Workers


Bahn, Kate, Generations


Employers in an anti-competitive labor market will have power over workers to suppress their pay and to dictate the quality of their working conditions. Research shows that big firms that dominate labor markets, leaving workers no practical choice other than to accept their job offers, tend to pay workers less than they would have in dynamic markets. Nurses who can work only at a local hospital, teachers who cannot leave a school district because their families cannot relocate, coal miners who must reside in mining towns-all of these workers exist in classic markets where employers have the upper hand. This phenomenon, called "monopsony," has gained a lot of attention recently (Manning, 2003; Bahn, 2018).

Monopsony occurs when employers are able to exploit labor market conditions to pay workers less than the value they contribute. Mounting evidence suggests more workers are subject to big employer power and that employer power has suppressed workers' pay.

Economists can predict which labor markets are more likely to have monopsonies. Individual employers have more wage-setting power to exploit the situation and pay less where workers have different preferences for the amount of time they work, have spotty and incomplete information about jobs and employers, and face high moving and relocation costs. Employers have less power over workers and wages where there is more competition, where unions are more powerful, or when the state enforces a higher minimum wage.

What Monopsony Means for Older Women

Older women workers may be subject to a disproportionate amount of monopsony power compared to other workers for several reasons, leading to lower wages and less economic security. Doug Webber (2015) of Temple University uses state-of-the-art data that connects information about workers and where they work- restricted access-linked employer-employee data from the Census-and finds monopsony is a widespread phenomenon that contributes to income inequality. He finds that women workers may be particularly affected, with monopsony lowering women's earnings 3.3 percent compared to men (Webber, 2016).

This conclusion makes sense because women may be more likely to face more difficulty in finding a job due to disproportionate care burdens and a higher likelihood of being a secondary income earner whose job search is shaped by the dominant earner, resulting in higher mobility costs. Older women workers are not exempt from care burdens, as they may be caregivers for family members (e.g., an aging spouse or elderly parents) or have their own health needs or constraints that impact how they search for jobs.

Monopsony also is more prevalent in femaledominated occupations such as nursing and teaching, which means these women face wage suppression over their entire careers. The impact of employer dominance on suppressing nurses' wages is one of the most robust and long-standing findings in monopsony research (Sullivan, 1989; Hirsch and Schumacher 1995).

Recent research from Elena Prager and Matt Schmitt (2019) confirms that hospital mergers reduce nurse wage growth by 1. …

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