The American labor market is showing signs of reduced competition, a phenomenon that researchers Alan B. Krueger and Eric Posner argue is driven by the growing influence of large firms. Their latest study links this imbalance to persistent wage stagnation widening income inequality and a slowdown in The authors point out that workers at the lower end of the pay scale feel the brunt of these trends, as their bargaining power wanes under the shadow of dominant employers.
In their analysis, the authors describe two primary mechanisms through which powerful employers can distort labor outcomes. First, they highlight the risk of labour-market monopsony where a single buyer of labor—or a tightly-connected group—can dictate terms, suppressing wages below competitive levels. Second, they expose coordinated practices such as no-poaching agreements that restrict employee mobility across firms, effectively curbing competition for talent.
Evidence that big firms are shaping wages
Recent empirical work shows that mergers and acquisitions among major corporations often lead to measurable declines in local wage growth. When a dominant player absorbs a competitor, the combined entity can exercise greater control over the regional labor pool, reducing workers’ ability to negotiate better pay. The researchers cite examples where post-merger wage trajectories flatten, especially in sectors dominated by a few large employers. This pattern suggests that traditional antitrust oversight, which focuses mainly on product markets, may overlook crucial labor-market effects.
Federal merger review to guard labor markets
Krueger and Posner propose that the federal government expand its antitrust toolkit to include explicit scrutiny of labor-market consequences. By requiring agencies such as the Department of Justice and the Federal Trade Commission to assess potential wage impacts before approving large mergers, policy makers could pre-empt the erosion of competition that harms workers. The authors argue that this added layer of review would not only protect wages but also preserve broader economic dynamism.
State bans on non-compete agreements for low-wage workers
Another pillar of their reform agenda is the elimination of non-compete covenants for employees earning below a certain threshold. Currently, many low-paid workers are forced to sign contracts that prevent them from taking similar jobs at rival firms for a set period, even when such restrictions have little relevance to protecting trade secrets. Banning these clauses at the state level would restore mobility, enable workers to seek better pay, and inject competitive pressure back into the labor market.
Prohibiting franchise no-poach arrangements
The final recommendation targets chains of franchise establishments that commonly share recruitment policies. When franchisees agree not to hire each other’s employees—a practice known as a no-poach agreement—they create an artificial barrier to entry for workers, mirroring the effects of a monopsony. Krueger and Posner suggest that legislation should make such arrangements illegal, thereby dismantling a hidden source of wage suppression across countless small-business locations.
Collectively, these three proposals aim to re-balance power between employers and employees, fostering a healthier, more competitive labor environment. By tightening merger oversight, outlawing low-wage non-competes, and shutting down franchise no-poaching, policymakers could address the root causes of wage stagnation and promote broader economic equity.
