COMPETITION & MONOPSONY IN LABOR MARKETS THEO RY, EV ID EN C - PowerPoint PPT Presentation

COMPETITION & MONOPSONY IN LABOR MARKETS THEO RY, EV ID EN C E, & A N TITRUST IM P LIC A TIO N S K e vin Ca ve s, PhD E c o no mists I nc o rpo ra te d April 23, 2014

GOOD MORNING(!) 2

OVERVIEW • Pa rt I : E c o no mic T he o ry & E mpiric a l E vide nc e • Ne c e ssa ry c o nditio ns fo r mo no pso ny po we r to ha ve a ntic o mpe titive e ffe c ts • E mpiric a l e vide nc e : mo no pso ny vs. c o mpe titive wa g e de te rmina tio n in la b o r ma rke ts • Pa rt I I : Ca se Disc ussio ns • Jo hnso n v. Arizo na Ho spital & He althc are Ass’ n • I itig atio n n Re : Hig h-T e c h E mplo ye e Antitrust L 3

ECONOMIC THEORY • Ne c e ssa ry Co nditio ns fo r Antic o mpe titive E xe rc ise o f Buye r Po we r • De ma nd suffic ie ntly c o nc e ntra te d fo r b uye rs to (c o lle c tive ly) e xe rc ise sig nific a nt ma rke t po we r o ve r se lle rs • No n-issue fo r re ta il ma rke ts (b uye rs ta ke ma rke t pric e a s g ive n) • Supply suffic ie ntly unc o nc e ntra te d fo r se lle rs to b e a to mistic / unc o o rdina te d • Hig h c o nc e ntra tio n o n b o th side s wo uld imply “b ila te ra l b a rg a ining ” situa tio n • E c o no mic pie divide d b a se d o n b a rg a ining skill; no c le a r a ntic o mpe titive e ffe c ts 4

ECONOMIC THEORY • Ne c e ssa ry Co nditio ns (c o ntinue d) • Supply c urve must slo pe upwa rd • Buye r fa c e s tra de o ff b e twe e n • Buying mo re inputs to e xpa nd o utput; a nd • Pa ying hig he r pric e pe r unit o f input • Co st minimiza tio n ↔ Pro fit ma ximiza tio n • T ypic a l fo c us: Buye rs in input ma rke ts, pa rtic ula rly la b o r ma rke ts 5

ECONOMIC THEORY • Co mpe titio n: E mplo ye rs ta ke ma rke t wa g e a s g ive n  W = De ma nd = MRP L 6

ECONOMIC THEORY • Mo no pso ny: E mplo ye r c a n ra ise (lo we r) wa g e b y re stric ting (e xpa nding ) hiring  MRP L = MC L > W 7

ECONOMIC THEORY la t se lle r supply  Mo no pso ny po we r irre le va nt • F • Ho lds fo r input ma rke ts whe n supplie rs ha ve hig h F C, lo w MC • L e ss like ly to ho ld in la b o r ma rke ts 8

EMPIRICAL TESTS IN LABOR MARKETS • T e sting c o mpe ting hypo the se s: mo no pso ny vs. c o mpe titio n • Ca rd & K re ug e r (AE R, 1994) April 1992: Ne w Je rse y minimum wa g e inc re a se d ($4.25 to $5.05); no • c ha ng e in minimum wa g e in ne ig hb o ring PA • Co mpa re c ha ng e in e mplo yme nt (F T E ) in NJ a nd PA, b e fo re vs. a fte r minimum wa g e hike • F T E inc re a se d in NJ re la tive to PA; c o nsiste nt with mo no pso ny po we r in lo c a l la b o r ma rke t • Spa rke d lo ng / c o ntro ve rsia l/ o ng o ing lite ra ture o f “diffe re nc e -in- diffe re nc e s” a ppro a c he s to te a se o ut e ffe c ts • F e ldma n & Sc he ffle r (1982); L ink & Russe l (1981) Unde r mo no pso ny, hig he r e mplo ye r c o nc e ntra tio n  L o we r wa g e s • So me e vide nc e o f lo we r RN wa g e s whe n ho spita ls mo re c o nc e ntra te d • 9

PART II: CASE DISCUSSIONS 1. Jo hnso n v. Arizo na Ho spital & He althc are Ass’ n 2. I n Re : Hig h-T e c h E mplo ye e Antitrust L itig atio n 10

JOHNSON V. AZHHA • Pla intiffs a lle g e d c o nspira c y a mo ng ho spita l me mb e rs o f Arizo na Ho spita l & He a lthc a re Ass’ n (AzHHA) to suppre ss b ill ra te s fo r te mpo ra ry nurse s • AzHHA ma inta ine d “re g istry” o f nurse sta ffing a g e nc ie s sinc e la te 1980s • I nitia l fo c us: Sc re e ning fo r q ua lity/ minimum sta nda rds • L a te 1990s: T o b e liste d o n re g istry a g e nc ie s must ne g o tia te so le ly w/ AzHHA • Ag e nc ie s o b lig e d to imple me nt unifo rm b ill ra te s a c ro ss me mb e r ho spita ls fo r pe r die m & tra ve l nurse s • Pla intiffs a lle g e d AzHHA’ s unifo rm b ill-ra te sc he dule fa c ilita te d a ntic o mpe titive e xe rc ise o f mo no pso ny po we r & a rtific ia lly de pre sse d nurse s’ wa g e s • (Disc lo sure : Sing e r a nd I wo rke d fo r Pla intiffs) 11

JOHNSON V. AZHHA • Proof of Impac t : T wo-Pronge d Approac h 1. I de ntify pla usib le e c o no mic the o ry—with c o rro b o ra ting e vide nc e —c o nne c ting c ha lle ng e d c o nduc t to a ntic o mpe titive e ffe c ts • Assuming c o nduc t o c c urre d, do e s the e c o no mic lite ra ture po int to pric e (o r wa g e ) e ffe c ts tha t wo uld b e fe lt b y Cla ss me mb e rs g e ne ra lly? • Ca n e ffe c ts b e sho wn in the insta nt c a se with c o mmo n e vide nc e ? 2. I de ntify pla usib le me c ha nism—suc h a s a rig id pric ing struc ture —tha t wo uld tra nsmit the se a ntic o mpe titive e ffe c ts to a la rg e sha re o f the me mb e rs o f the pro po se d c la ss Is c la ss suffic ie ntly “c o he sive ” suc h tha t the c ha lle ng e d c o nduc t • wo uld ha ve b e e n fe lt b y a ll o r ne a rly a ll puta tive c la ss me mb e rs? 12

JOHNSON V. AZHHA • Ste p 1: • E c o no mic lite ra ture o n e xe rc ise o f mo no pso ny po we r in nursing la b o r ma rke ts • I nve rse re la tio nship b e twe e n ho spita l c o nso lida tio n a nd nurse c o mpe nsa tio n; c o nsiste nt with mo no pso ny po we r • Diffe re nc e -diffe re nc e s b e nc hma rk: E mpiric a l te st fo r e xe rc ise o f mo no pso ny po we r b y AzHHA • Co mpa re c ha ng e in c o mpe nsa tio n in Arizo na nurse s o ve r time to c ha ng e s fo r te mpo ra ry nurse s in ne ig hb o ring sta te s (whe re c ha lle ng e d c o nduc t wa s a b se nt) • Simila r to Ca rd & K rue g e r • Re g re ssio n a na lysis c a n c o ntro l fo r po te ntia lly c o nfo unding fa c to rs (e .g ., de mo g ra phic s, sta te e c o no mic tre nds) 13

JOHNSON V. AZHHA • Ste p 2: • Pric ing struc ture linking nurse c o mpe nsa tio n to fixe d b ill ra te • AzHHA pa id c o mmo n ho urly ra te to sta ffing a g e nc ie s, whic h pa sse d thro ug h a pe rc e nta g e o f tha t b ill ra te to c la ss me mb e rs • Pla intiffs’ e xpe rt (Sing e r) sho we d b ill ra te s po sitive ly c o rre la te d w/ pa y ra te s • Co rre la tio n a na lysis c o rro b o ra te d b y do c ume nts & te stimo ny • “I n fa c t, Dr. Sing e r’ s da ta indic a te s tha t b ill ra te s we re po sitive ly c o rre la te d with pa y ra te s fo r six type s o f te mpo ra ry nursing sta ff, b o th pe r die m a nd tra ve ling , a t six AzHHA me mb e r a g e nc ie s fo r a ll a va ila b le ye a rs. Mo re o ve r, it sta nds to re a so n tha t, a s the a g e nc ie s ha ve te stifie d a nd is re ve a le d b y the fina nc ia l re c o rds tha t ha ve b e e n pro duc e d thro ug h the c o urse o f disc o ve ry, if bill ra te s we re to rise , so would te mpora ry nursing wa g e s. ” - Jo hnso n , 2009 WL 5031334 a t *8 14

JOHNSON V. AZHHA • Outc ome • Distric t c o urt c e rtifie d c la ss o f pe r-die m nurse s • Se ttle me nt re a c he d fo r ~$22.5M • Co urt de c line d to c e rtify tra ve l nurse c la ss • T ra ve l nurse s re c e ive d a nc illa ry b e ne fits (ho using , tra ve l stipe nds) • “Offse t” the o ry  De fe nda nts ma y ha ve a lte re d a no the r dime nsio n o f c o mpe nsa tio n, ne g a ting impa c t fo r a t le a st so me puta tive c la ss me mb e rs 15

JOHNSON V. AZHHA • T ake away • Offse ts a nd o the r c o mplic a tio ns in c o mpe nsa tio n struc ture s pre ve nte d c e rtific a tio n in se ve ra l o the r c a se s, e .g ., Re e d v. Advo c ate : “T he Re e d de c isio n is c o nsiste nt with a de ve lo ping b o dy o f c a se la w re je c ting c la ss c e rtific a tio n with re spe c t to a lle g a tio ns o f a Se c tio n 1 wa g e c o nspira c y. Prio r wa g e c o nspira c y c a se s…re je c te d c la ss c e rtific a tio n b a se d la rg e ly o n the g re a t va rie ty o f e mplo ye e c ha ra c te ristic s tha t influe nc e wa g e s a nd va ria tio n in wa g e s a nd othe r c ompe nsa tion pa id to e mploye e s. T his va ria tio n is a ma jo r o b sta c le to pla intiffs c la iming the y c a n pro ve impa c t o n a c la ss-wid e b a sis with c o mmo n pro o f…” – Blo c h & Pe rlma n, Antitrust , Vo l. 24, No . 3, Summe r 2010 (e mpha sis a dde d). 16