Economists Finally Admit Employers May Be Suppressing Wages, Thanks to a New Book

After decades of scholarly indifference to the concept that a single or limited set of employers can wield sufficient market power to depress wages—a notion known as monopsony—a recent surge of empirical studies now contends that such power is not a rarity but a structural feature of modern labor markets, a contention that is crystallized in a newly released book which argues that this overlooked dynamic is central to the widening income inequality observed today.

The emerging body of research, drawing on granular wage data across a multitude of industries and geographic regions, demonstrates that many workers face isolated employment options so constrained that firms can set compensation below competitive levels without provoking significant turnover, a pattern that the book attributes to the erosion of collective bargaining mechanisms, the proliferation of gig‑economy platforms, and regulatory frameworks that inadvertently reinforce employer discretion, thereby providing a compelling, data‑driven explanation for the persistent stagnation of real wages despite record‑high productivity.

What is particularly striking, beyond the substantive findings themselves, is the institutional inertia displayed by the economics profession, which for generations relegated monopsony to a footnote in theoretical textbooks while focusing overwhelmingly on perfect‑competition models, a methodological blind spot that not only delayed recognition of a crucial driver of inequality but also limited the formulation of policy responses capable of correcting the power imbalance and safeguarding workers from systematic underpayment.

This convergence of new scholarship and a bold synthesis presented in the book thus forces a reckoning with the longstanding assumption that markets are inherently competitive, urging policymakers, labor advocates, and academic institutions alike to confront the reality that employer market power is pervasive, to reassess regulatory approaches that have tacitly accommodated such dominance, and ultimately to consider whether the continued neglect of monopsony dynamics constitutes a deliberate oversight or an unavoidable consequence of entrenched theoretical orthodoxies.

Published: April 21, 2026