Uploaded May 2022 | Updated September 2026, 3 weeks ago
Wages for the vast majority of workers have stagnated in the United States since the 1980s. We offer two coexisting explanations based on rising market power: 1. Monopsony, where dominant firms exploit the limited mobility of their own workers to pay lower wages; and 2. Monopoly, where dominant firms charge too high prices for what they sell, which lowers production and the demand for labor, and hence wages economy-wide. Using U.S. Census data for the period 1997-2016, we estimate that 60 percent of wage stagnation is due to the rise of monopoly, and that share is growing. The remainder is due to monopsony.
Wages for the vast majority of workers have stagnated in the United States since the 1980s. We offer two coexisting explanations based on rising market power: 1. Monopsony, where dominant firms exploit the limited mobility of their own workers to pay lower wages; and 2. Monopoly, where dominant firms charge too high prices for what they sell, which lowers production and the demand for labor, and hence wages economy-wide. Using U.S. Census data for the period 1997-2016, we estimate that 60 percent of wage stagnation is due to the rise of monopoly, and that share is growing. The remainder is due to monopsony.
