- Research reveals growing issue of buyer power in local labour markets;
- Walmart Supercenter openings in the US contribute to rising poverty levels and declining union membership in the decade after;
- Organised labour can act as a deterrent to monopsonist employers.
INET Oxford researchers have made advances measuring the impact of monopsony in local labour markets, with newly published work quantifying changes in poverty, public finances and worker power in the decade following the entrance of a monopsonist employer.
Twin papers, published this summer in Labour Economics and American Sociological Review, have pieced together the impact Walmart Supercenter openings had on their local communities in the US across several social and economic indicators. INET Oxford researchers Zachary Parolin and Lukas Lehner collaborated on both papers, joined by external colleagues Clemente Pignatti, Rafael Pintro Schmitt, and Joshua Choper.
With almost 3,500 Supercenters in operation in 2019, each employing on average over 350 workers, Walmart is the largest private employer in the US. As it has expanded its operations across rural America, it has outcompeted independent grocery stores, coming to dominate local labour markets.
Looking at the local economy, the researchers found that the opening of a Supercenter had a a significant impact on a community in the decade following:
- Household earnings fell – Wages fell at an individual level and incomes dropped by about 4% per household;
- Poverty levels rose – Counties with a Supercenter opening saw a 2.2 percentage points rise in poverty relative to counties without an opening;
- Union membership dropped – Worker power declined across the local labour market after Walmart entry, with union membership falling by up to 3.5%.
Using a restricted dataset that follows the same workers across their careers, the study is the first to understand Walmart’s effects on poverty using the most robust poverty indicator that the U.S. Census Bureau offers.
What is monopsony and why is it a growing issue?
The research has revealed the growing but under-researched issue of monoposy power in local labour markets.
Monopsony refers to a condition where a one or a few employers come to dominate a local labour market, to the exclusion of others employers, so that workers have fewer outside employment options. Also known as 'buyer power', monopsony can co-exist with worker power in several ways, according to Choper, Lehner, and Parolin.
| High Buyer Power | Low Buyer Power |
High Worker Power | Negotiated monopsony; workers have few outside options yet carry relatively strong negotiation power and collective coordination (e.g., public education) | Competitive but coordinated markets; workers have outside options and have relatively strong coordination (e.g., construction work) |
Low Worker Power | Typical monopsony; employer can suppress wages with little effective resistance (e.g., Amazon, Walmart) | Competitive but uncoordinated markets; workers have outside options yet face barriers to organization (e.g., platform economy) |
Worker Power can be an effective barrier to entry
The research team also found that worker power -- higher union membership, specifically -- acted as a credible barrier to entry for monopsonist employers, with evidence suggesting that more highly unionised areas were less likely to see a Walmart Supercenter in their area.
Professor Zachary Parolin said that unions had inhibited the spread of buyer power by maintaining fair and competitive balance among local employers.
"These two studies have quantified how monopsony power, in the form of Walmart Supercenter openings, can damage a local labour market. Our evidence suggests that the negative costs to workers’ wages outweigh the lower prices that Supercenters generally offer.”
