Asked by: Sabin Nebesasked in category: General Last Updated: 9th April, 2020
What is wage suppression?
Similarly, it is asked, what is salary suppression?
The culprit is “monopsony power.” This term is used by economists to refer to the ability of an employer to suppress wages below the efficient or perfectly competitive level of compensation. In other words, in the labor market, effectively a small number of employers are competing for their labor.
Additionally, what is an example of a monopsony? A monopsony is when a firm is the sole purchaser of a good or service whereas a monopoly is when one firm is the sole producer of a good or service. The classic example of a monopsony is a company coal town, where the coal company acts the sole employer and therefore the sole purchaser of labor in the town.
Similarly, why can a monopsony suppress wages?
Problems of monopsony in labour markets Monopsony can lead to lower wages for workers. This increases inequality in society. Workers are paid less than their marginal revenue product. Firms with monopsony power may also care less about working conditions because workers don't have many alternatives to the main firm.
Why are wages stagnated?
The ability of a company to depress wages due to lack of competition for workers is known as “monopsony power.” Benmelech wondered if monopsony power, caused by local-labor-market concentration, might be related to the larger wage-stagnation trends among American workers over the past four decades.