Last week we were introduced to the idea of a monopsony. By definition a monopsony is a market situation in which there is only one buyer. We see many examples of monopsonies in the real world.
Labor productivity is run by industries and other people. They control the pay, the number of workers, how long they work and do what’s best in the interest of the company rather than the workers. The company will also look for certain skills or more versatile people so they can one person that can do many things rather than multiple people for each of those skills. A bigger company who can maintain a steady price will also be above those that would thrive in more competitive markets denies the access of goods to the consumer who are willing to pay the price above the cost of production but below the company’s price. Monopsonists can also move the market down so that the labor market goes down and so do the wages. Many examples of monopsony relate to the hiring of workers in relation to the labor market in which there is one company that is the sole purchaser of labor. This leads to stagnant wages because the employers can gain power and more revenue with the decrease of wages. Collusion can also drive down wages. Sometimes the salary earned don’t match what is needed for the cost of living at that time so the value of the money you have goes down in relation. So although your nominal wage increases, your real wage diminishes.
Some examples of monopsony include school systems, Silicon Valley and Amazon. In school systems, teacher are the only employees and the school district are the only employers for the teacher. They control how many teachers are needed and the wages the teacher should have based on their budget; which is different based on public or private, or location of the school. This could lead to problems on both sides if the teachers go on strike because of low wages, or if the school district decides to get rid of teacher and maybe try newer ways of teaching. Another example is Silicon Valley. Silicon Valley is known for it big industry of technologies. The bigger firms such as Apple and Google could get away with lower wages because there aren’t explorers outside the tech industry that require some of the skills that these worker have. There is no competition. One last example is Amazon. They control the price at which they charge for shipping companies such as Fedex and UPS. In cases like these Amazon become the dominant buyer of labor and can control their wages.
A monopsony can be dangerous because it can lead to a loss of societal well being as low wages can’t cover the high cost of living. In addition, with those companies dominating the labor market, the absence of a raise in wages. For example low unemployment rates there will be other factors that could affect the policies within the company, such as Amazon.
This is a great post! Monopsony is a really important topic and you used different examples that explained it really well. All three examples you used weren't very related but they all represented the labor market really well and showed factors that could effect a monopsony. You also ended with discussing why a monopsony may be a bad idea and how it becomes unfair to the workforce when companies begin taking advantage of them.
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