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Why antitrust law should protect workers, not just consumers

Employees in the kitchen at McDonald’s headquarters in Chicago in 2018. Low-wage workers were hit especially hard by pandemic job losses. (Photo by Joshua Lott/Bloomberg)

It’s a moment of reckoning for workers across America, especially those who are low-paid and working mothers. The former make up a disproportionately high percentage of those who have been “displaced” from their jobs during the pandemic — meaning they lost work and have not yet recovered it — according to a July report from researchers at the Brookings Institution’s Metropolitan Policy Program. Meanwhile, an estimated 1.8 million women, many of them mothers, have dropped out of the workforce, leading to the lowest female labor force participation rate in 30 years.

What’s especially concerning, although hardly surprising, is that many of these workers do not want their jobs back. As has been well documented in the media, many service industry workers are not exactly clamoring to return to jobs defined by their harsh conditions and low pay. And working mothers have historically lacked the support — in the form of subsidized, quality child care; paid parental leave; and worker-friendly school schedules — to make life manageable even in the best of times, much less over the last year and a half.

Given this tumult, it’s an opportune moment for “How Antitrust Failed Workers” by Eric A. Posner. The book is not explicitly situated in the pandemic context (and presumably was researched well before it), yet it nonetheless speaks directly to these unique times. Posner, a professor at the University of Chicago Law School, argues that we have failed as a society to deploy one of our greatest, most ill-understood assets to protect the American worker from mistreatment and suppressed wages: antitrust law. While lawyers have called on the provisions of the Sherman Antitrust Act of 1890 time and again to protect the American consumer from the problematic effects of corporate mergers and price fixing, they have very seldom summoned them — much less successfully — in defense of the worker. That’s in spite of commonly deployed noncompete clauses that limit workers’ job options, and mergers that slash their wages.

The Justice Department and the Federal Trade Commission “have never challenged a merger because of its possible anticompetitive effects on labor markets or even rigorously analyzed the labor market effects of mergers as they do for product market effects,” Posner writes. (For the first few decades of its existence, the Sherman Act was used to go after unions, Posner notes, which were sometimes accused of violating antitrust laws to fix the price of labor.)

Yet what labor economists call “monopsonies” — markets in which employers hold excessive power over wages and working conditions — are frustratingly common. Drawing on multiple studies, Posner reports that “many labor markets are highly concentrated, and . . . labor monopsony, as theory would predict, pushes wages below the competitive rate.”

By one estimate, “monopsony power” in the United States reduces overall employment and output by 13 percent. By simply banning the practice of requiring some employees to sign noncompete agreements — which, Posner points out, are not limited to higher-wage workers and were infamously used by Jimmy John’s to prevent its sandwich-makers from seeking work at competitors — we could increase earnings nationwide by as much as 7 percent.

Now is the time, Posner argues, for reform and reinvention of antitrust law as it applies to labor. Other protections for workers have eroded in recent decades with the collapse of union activity and the devaluation of the federal minimum wage because of inflation. Posner, who writes in a technical but clear way, walks us through several (generally) anti-worker practices that should be — and typically aren’t — challenged under antitrust law, and he presents specific proposals for reform.

Many mergers, for instance, should be subject to a “worker welfare” standard just as they are now subject to a “consumer welfare” one, he argues. Noncompetes should be treated as “presumptively illegal,” with the burden on the employer to show that they will benefit rather than harm workers. And the Justice Department should publish detailed guidance that helps workers who are victims of anticompetitive behavior by monopsonists turn to the Sherman Act for redress.

The stakes, Posner reports, are high. He makes a persuasive argument that the threats posed to societal welfare by monopsonists often surpass those of monopolists. It was far easier to prosecute the chicken-processing companies Perdue and Tyson for possible price fixing as opposed to wage fixing, Posner writes. “Yet the harm caused to workers was far more focused and damaging than the harm caused to consumers, which was diffused through a massive population.”

“How Antitrust Failed Workers” is far richer in evidence and analysis than narrative. Posner includes brief descriptions of a couple of workers affected by the failures of antitrust law. Notably, there’s Leinani Deslandes, a McDonald’s manager who was told she wasn’t a viable candidate for a higher-paid position at a nearby McDonald’s restaurant without the consent of her original employer, who refused to grant it. Frustrated, she left for an even lower-paid position at Hobby Lobby.

Deslandes’s case is interesting to Posner mainly as a launching point to explore the broader phenomenon of no-hire rules within franchises. (He never clearly states how her legal case was pursued or if it has concluded.) If I had one quibble with the book, it’s that Posner doesn’t delve fully into the equity implications of his work. We learn several times, and with some valuable context, that low-income workers have indeed been affected by shortcomings in antitrust law and litigation. He tells us, for instance, that nearly 35 percent of lower-income workers without a bachelor’s degree were subject to noncompetes at some point in their lives (somewhat lower than the percentage with at least a bachelor’s degree). And he tells us that “no-poaching agreements for low-skill workers are almost certainly socially harmful. . . . The workers — poorly paid, vulnerable, and unlikely to have access to legal counsel — are harmed, and production is reduced.”

A more overt and consistent focus on equity — on who is harmed most and why — could have strengthened an already strong case for legal reform and review. The story of work in America is a story of inequality. The reader senses that many of the changes Posner proposes could carry the most benefit to the most vulnerable. Yet I craved a clearer answer as to whether his work represents an abstract argument for legal reform, a framework for attacking inequality or a complicated amalgam of the two.

How Antitrust Failed Workers

By Eric A. Posner

207 pp. $29.95