Decreased competition to blame for flat wages: Both Monopoly and Monopsony contribute to the problem

We are finally getting some good research on why wages have not grow in the US for 45 Years.  The answer is decreased competition and corporate over-consolidation.  When companies have monopoly and monopsony power they raise prices and lower the cost of inputs. Labor is a key input.

Monopoly is a market with a limited number of sellers. Monopolists charge higher prices because they face little selling competition. Monopsony is a limited number of buyers. The pay lower buying prices because of limited buying competition.

Once again, it's corporate concentration, greed and power. Yes, we were just as surprised as you.  Corporations are using monopoly and monopsony power to drive up prices and pay low wage to increase their profits. Who knew?

Bloomberg has a good write up of the issue. The Bloomberg article refers to a paper, from Simcha Barkai at the London School of Business. He examines the declining returns to labor, also known as the labor share of income in the economy.  The paper also finds a declining return of income for capital as well.  So where does this "missing" money go? To profits.  Corporate profits are again at record levels.

The author suggests the reason for surging profits is decreased competition and monopolization. A link to the paper can be found here at "Declining Labor and Capital."

Slate has similar article and link to a NBER paper which finds that employers are using monopsony powers to hold down wages. Monopsony is the condition of a market with too few buyers.