In my working paper, “Walmart Supercenters and Monopsony Power: How a Large, Low-Wage Employer Impacts Local Labor Markets,” I provide evidence that Walmart Inc.—the largest private-sector employer in the United States—exercised monopsony power in labor markets where the firm opened Supercenter stores, with consequences well beyond the retail sector. Specifically, I demonstrate that local Supercenter entry reduced countywide aggregate employment and earnings while an increase in the minimum wage caused local aggregate and retail employment to increase in counties that had a Supercenter. These results run contrary to what economists would expect if labor markets were competitive.

In this issue brief, I provide some context for thinking about the role that Walmart Supercenters play in local labor markets in the United States before outlining the novel approach I use to estimate their impact on several outcomes of interest. My results provide the backdrop for a discussion of how this retail giant and other large, low-wage employers may gain the ability to exercise monopsony power. These findings have significant implications for potential policy responses when labor markets are not competitive.

I conclude the issue brief with four possible policy responses based on the findings in my working paper. I argue that policymakers should:

  • Preemptively support collective bargaining and higher local minimum wages in communities where employers may have the opportunity to exercise monopsony power
  • Prescriptively support collective bargaining and higher local minimum wages in communities where employers are already exercising monopsony power
  • Examine the wage- and price-setting powers of monopsony employers when considering policy decisions
  • Examine the monopsony power of employers in local labor markets, especially at the low end of the wage scale, when making policy decisions

Read the full article about fighting earnings depression caused by monopsony by Justin Wiltshire at Equitable Growth.