Monopsony in Labour Markets: The Corporate Law Contribution

Abstract

Labour economists have in recent years attributed wage stagnation to employers' monopsony or oligopsony powers, which may be a consequence of corporate mergers. Traditional competition law cannot see the problem because it focuses on the effects of mergers on output markets (goods/services) and not input markets (labour). This article draws a parallel with company law (including takeover regulations), which it argues is oblivious to the adverse labour market effects of mergers because it narrowly focuses on capital (shareholders) and not labour (workers). These blind spots mean that horizonal mergers that lead to concentrated labour markets but not concentrated products markets remain unregulated, exacerbating the wage stagnation. The article examines possible changes to takeover regulations that may address this problem, and concludes that the prevailing shareholder-centric DNA of company law is an obstacle to any measure that might favour employees. As long as company law remains fixated on one input (capital), the only viable primary line of assault on monopsonistic/oligopsonistic labour markets, it seems, is a reorientation of competition law (e.g. expansion of what counts as the public interest in a merger review). In short, in the absence of a holistic ‘enterprise’ law, the political-economic backgrounding of corporate law presents a formidable obstacle to change, since corporate law is incapable of putting its own house in order.