New Study Shows How Rural Areas Have Been Hardest Hit By Industry Consolidation

I think everyone can agree that monopoly power usually results in not only higher prices but also worse service. Increasingly, there is also evidence that monopoly power also restricts wage growth. That is the conclusion of a new working paper out of the National Bureau of Economic Research (NBER).

The New York Times summarizes the paper as showing “that wages fell when fewer employers in a geographic area listed most of the jobs in an occupation”. The study looked at job postings from 2010 to 2013 and not only discovered that millions of Americans live in areas where just a few employers posted job opportunities but that when the number of employers actually posting listings decreased, even if the number of postings remained static, wages also decreased.

But the critical part of this analysis is that it details how undue concentration in certain industries has actually hit rural communities far harder than urban ones. As one of the authors of the study describes the correlation between concentration and wages, “There is definitely a strong rural urban pattern that I can see. Rural areas are likely to have a higher level of concentration — and, for any given unit of concentration, a larger effect”.

The Times article focuses on how the consolidation in the farm equipment sector and its dealerships has shrunk the number of employers in rural Wisconsin. Worse, even mechanics who would prefer to strike out on their own to repair this farm equipment feel constrained by the fact that their potential customers do not want to jeopardize the relationship they already have with the handful of corporate-owned dealers who sell and repair that equipment. So the industry consolidation is not only keeping wages down but also putting up a significant barrier to entry.

This is exactly the situation that strong antitrust enforcement is designed to protect against. I continue to believe that Democrats should focus intently on stronger antitrust enforcement as a potent political and election message. Breaking up the undue concentration in so many industries will lead to more jobs, higher wages, more competition, and reduced inequality while also reducing the awesome political power of some of these large monopolies. Name one other policy that accomplishes all those goals at once.