Cooking the Books: Mono – what?

Everybody has heard of monopoly, where there is a single seller, but have you heard of its opposite ‘monopsony’, where there’s a single buyer? When there is a monopoly (from the Greek words for single and seller) the monopolist is in a stronger position than the buyer and so can extract a higher price than otherwise for what they are selling. With monopsony (from the Greek words for single and buyer) it’s the opposite – the buyer can buy at a lower price than otherwise. It’s what the supermarkets do with their suppliers, and, as an article in the Times (19 February) confirms, what some employers can do when it comes to purchasing the labour-power of their workers.

Under the headline ‘Workers are paying the price for being less able to stand up to employers’, its Economics Editor Philip Aldrick commented on a recent study of monopsony in the UK private sector labour market between 1998 and 2017 (personal.lse.ac.uk/tenreyro/monopsony.pdf). This period includes the eight years since the beginning of the Great Recession that followed the Crash of 2008 during which, Aldrick notes, ‘real earnings have stagnated, the longest stretch since Napoleonic times, as inflation raced ahead of pay’. The normal explanation of this would be that the increased unemployment in a slump weakens the workers’ bargaining power. However, the stagnation persisted even though the level of unemployment was lower than in the downturns of 1980s and 1990s and was in fact falling at the end of the period. So what could be an explanation?

Step forward ‘monopsony’. Not literally, as there is not a single employer (that only existed under the state capitalism of the former USSR) but where there is a small number of employers who dominate the buying side in the labour market. Technically this is ‘oligopsony’ (a few buyers) but the term used in the study is ‘market concentration’ measured by how few employers employ the bulk of workers in an industry or region.

The study concluded:

‘We have shown how higher levels of concentration are associated with lower levels of pay for workers not covered by a collective bargaining agreement, and that for those who are covered by a CBA that this negative correlation between pay and monopsony mostly disappears. ‘

Since ‘collective bargaining agreements cover only one fifth of private sector workers today, compared with half in 1998’, Aldrick wonders whether the study’s conclusion is a possible explanation for wages continuing to stagnate despite unemployment falling.

In any event, it vindicates the Marxian view that unions can provide a limited protection against employers, basically by banding workers together to in effect form an opposing monopoly of sellers of labour-power, even if in some cases this is just running fast to stand still and even to avoid slipping back so much.

Traditionally, socialists have referred to the capitalist class as having a ‘monopoly’ over the means of wealth production, based on the accepted extension of the word beyond its literal meaning of ‘single seller’ to mean ‘exclusive control’.  This exclusive control of productive resources also puts the capitalist class as a whole in a position of monopsony i.e., a single buyer, vis-à-vis the working class as a whole since, while workers can change employers they still have to find someone to purchase their labour power. In short, the employing class has the whip hand. Which can only be ended by abolishing the wages system.