Merger, Less Jobs and Smaller Paychecks

We’re so used to hearing about mergers, we don’t give them sufficient attention. Some are well known names, Amazon bought Whole Foods, Cigna bought Express Scripts, and some are names we may not often hear such as Marathon Petroleum buying rival Endeavor. There are also those which are proposed, AT&T merger with Time Warner or T Mobile with Sprint, for example. The number of mergers keeps growing; so far in 2018 $1. 7 trillion worth of deals have occurred and more are expected. We are so inured perhaps we hardly think of the consequences. As far as the mergers being studied by the Justice Department are concerned, however, only how they will affect consumer prices will be looked at.  Mergers reduce competition and its incentive to attract customers, and while consumer groups and others opposing them say they will not be good for consumers and increase prices in the long run, if not the short one, those who study mergers think that only looking at consumer prices is a small slice of the consequences. Economists have now studied the impact of mergers and found that they do a lot more besides affect consumer prices. They first of all reduce the number of employers available and the numbers of jobs as well. And also they lead to what is called monopsony by reducing the number of job opportunities for workers and therefore placing the employers in a better position to dictate terms. So when combined with the weakening of unions, workers are losing bargaining power.  The result is wage stagnation. Corporations keep earning larger profits but wages do not keep up and can be said to be smaller.

The number of mergers keeps happening at a pace hard for the average person to follow. We may not be able to stop them for the present, but we must be aware of what they do and must insist that those we vote for be informed and prepared to tackle an issue which is key to economic health and economic inequality.

Leave a Reply