These mass layoffs weren’t consequences of falling sales or government red tape. Instead, they were all the direct result of mergers. And as our economy has become increasingly monopolized in recent decades, they’re a tiny sampling of what’s been a common phenomenon in communities around the country.
In recent years, policymakers and the public have increasingly recognized the harms caused by rampant corporate consolidation — from Facebook’s manipulation of our online information commons to meatpackers’ flagrant abuse of ranchers to Big Pharma’s deadly collusion on the prices of lifesaving drugs. But one systemic harm that has flown under the radar in the national debate is that news of a merger often means layoffs are not far behind, leaving families, and even whole communities, in peril and devastation.
In just the first three quarters of 2021, global merger and acquisition activity reached a staggering $4.3 trillion, shattering the previous record of $4.1 trillion set in 2007. John Waldron of Goldman Sachs, often described as the U.S. financial industry’s mergers and acquisitions guru, was remarkably candid in a speech last October about the merger boom he is helping to engineer. These merger-driven layoffs “will be complicated societally,” he said, because “politicians are going to be faced with the uncomfortable reality that you’re going to have more big business doing better and that there’s going to be more losses of jobs along the way.”
Waldron’s frankness may be unusual, but the position he takes here is far from exceptional. In fact, for decades, the bipartisan consensus about antitrust and merger policy didn’t just tolerate, but actually embraced job losses. The idea was that merged corporations would pass savings from firing workers on to consumers in the form of lower prices. (Research has shown that consolidation is actually driving up prices — although anyone who pays for an airline ticket, cable bill, or hospital stay could tell you that.)
After 500 unionized workers’ livelihoods disappeared in Eden, N.C., following Anheuser-Busch InBev’s takeover of SABMiller, conservative scholar Daniel Crane said, “The focus [of antitrust] is on consumers and on economic efficiency as opposed to preserving jobs.” Diana Moss of the liberal American Antitrust Institute offered a similar description, noting that antitrust enforcement “doesn’t look at job creation as a benefit of a merger. It tends to go the other way: Realizing cost savings means fewer jobs.”
That this sentiment has been the bipartisan consensus for decades is outrageous. Even more outrageous is the fact that executives who agree to sell their companies routinely get massive payouts — the polite term is compensation packages — for doing so. In the case of T-Mobile/Sprint, for example, T-Mobile’s CEO walked away with a cool $137 million, while thousands of employees got pink slips. And AT&T’s acquisition of Time Warner netted Time Warner’s CEO a $400 million parachute, while a staggering 45,000 workers were cut from payrolls and consumers saw a steady stream of price hikes on streaming and satellite TV services after the merger cleared.
Fortunately, since Crane and Moss made their observations about antitrust and layoffs a few years ago, the previously elite world of antitrust has transformed. President Biden and senior economic officials have publicly rejected the pro-merger, pro-job-cuts approach that both Republican and Democratic enforcers have embraced since the Reagan era. Aggressive new populist leaders at independent agencies like the Federal Trade Commission are now pushing hard against a merger tidal wave.
New research affirms that stopping the merger wave is a key plank of any working people’s agenda. For decades, it has been an article of faith among economists that layoffs don’t particularly matter because it’s easy to find a similar job. While common sense suggests this is nonsensical, the assumption still held most policymakers in thrall as they allowed merger after merger to go through. But over the past five years, younger economists have found that most “labor markets are highly concentrated,” meaning that in many regions, there are not many employers competing over workers. They also found that the fewer employers in any market, the lower wages tended to be. And we’re not talking small amounts of money. It means, as law professor Eric Posner notes, that many “workers are paid at least several thousand dollars per year below the competitive rate.”
Despite this research — and the newfound political energy of the antitrust movement — merger-based layoffs are still endemic, but there are efforts underway to push back. As Federal Trade Commission Chair Lina Khan has made clear, the days of rubber stamping mergers are over, but her capacity and authority are limited. A bill proposed this past spring by Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) promised to pause merger activity and, if passed, would have saved thousands of jobs as covid wreaked havoc on the economy. Another bill, introduced by Sen. Amy Klobuchar (D-Minn.), would take a more moderate but still useful approach by banning giant corporations from sucking up smaller ones. Sen. Josh Hawley (R-Mo.) has introduced similar legislation. States such as New York and California are considering major changes to their own antitrust laws. Another idea that could slow the pace of mergers is new legislation that would simply ban the massive “golden parachutes” CEOs get for agreeing to sell out.
It’s clear that when we think about dispiriting job numbers — and the awful realities of job loss on individual lives and families — we should recognize that corporate consolidation plays a role. As antitrust enthusiasm picks up speed, leaders in Congress and the Biden administration must reject the old bipartisan consensus that looked the other way where workers were concerned, recognizing instead that layoffs are very much a part of the problem. If they want to save American jobs, that means putting a stop to the merger frenzy. It might even save their own.