This is about the United States, but similar things may be happening elsewhere.
A new theory for why Americans can’t get a raise. nothing
Labor Market Concentration
If you were a delivery van driver searching for a new job any time between the years of 2010 and 2013, chances are, you wouldn’t have found many businesses competing for your services. In Selma, Alabama, there was, on average, just one company posting help wanted ads for those drivers on the nation’s biggest job board. In all of Orlando, Florida, there were about nine. Nationwide the average was about two.
There is a paucity of potential employers in several other fields.
The degree of concentration, and the effect on wages, tended to be worse in smaller towns than major cities. Places like Alpena, Michigan, and Butte, Montana, had the least competition among employers, while New York, Chicago, and Philadelphia had the most. It also varied by occupation. Equipment mechanics, legal secretaries, telemarketers, and those delivery drivers faced some of the most highly concentrated job markets; registered nurses, corporate salesmen, and customer service representatives had some of the least. But overall, the problem looks pervasive.
Thus, many employers are monopsonies or oligopsonies, the buying counterpart to monopolies and oligopolies.
This theory does not rule out other possibilities for workers getting less and less of the GDP, like suppression of labor unions and automation and financiers threatening to downgrade businesses for not paying their employees less.
This has various policy implications. Labor unions and the minimum wage can be good ways of coping with employment monopsonies and oligopsonies. It also suggests an additional concern for antitrust actions.
It is interesting that you picked Alpena Michigan. I did quite a bit of work in the cement plant in Alpena. When the plant was owned by National Cement it employed over 600 people. This was a huge employer in a town of ~10,000 people. The plant was a union plant. The plant was bought by a French company, LaFarge, picking over the bones of National which went out of business. The French intended to close the plant. They were buying the market of the plant intending to supply the cement for the market from an expansion in one of their Canadian plants near the Great Lakes. They hired my company who along with their own engineering staff to do an audit of the plant to see if there was any equipment in it worth more than steel scrap value, a penny a pound.
Cement is the gray powder that you mix with sand and aggregate (stones) and water to make concrete. Cement factories are large industrial plants making thousands of tons of cement a day, plants that cost hundreds of millions of dollars. They are not concrete plants.
We found a plant that was well maintained but it used an older technology that was not energy efficient. But it had two major advantages, the energy was recovered to generate electricity and Michigan was at that time encouraging this type of what is called cogeneration, using excess heat generated by industrial processes to generate electricity. They forced the power utility to wheel the excess power generated to the cement plant's private customers in the state for 1 cent a kWh. The plant's steam turbines were manufactured in the 1920's and 30's. Replacing them with modern much more efficient turbine generators and providing just a small over fired superheating section in the waste heat boilers we could more than double their generation using the same amount of steam.
Their other big advantage was that they shipped the cement by ship on the Great Lakes, the cheapest form of transport and they were ice free for nine months of the year. They could sell cement not only around the Great Lakes they could go down the Illinois River to the Mississippi/Missouri/Ohio River systems. All of the Lafarge plants in Canada shipped by truck on the roads. Also the customers of the plant were largely in the US and the US was imposing a duty on imported cement and were talking about increasing it. NAFTA eliminated the duty for Mexican and Canadian cement.
We finally recommended that they keep the plant open and to cut the employment to ~250 by automation and outsourcing some maintenance work. They kept the union but were granted a lot of concessions by the union, including that construction in the plant could be by non-union contractors. We presented the proposal to the Lafarge board of directors in North America at their Corporate headquarters outside of Washington DC. One of the board members and possibly the only one who stayed awake and attentive through the presentation was Hillary Clinton. Her husband Bill had been the governor of Arkansas and would be again before he was elected president. She was on the board because of her reputation as a corporate lawyer.
There are very few American companies making cement in the US. Lafarge was combined a couple of years with a Swiss company Holderbank, trade name Holcim. I don't know what they call the combined company but they will certainly be bought out probably by a Chinese government concern that will pay too much for them and eventually will go bankrupt. The other big company in the US was CEMEX, a Mexican company, it is pronounced CEM-ex, not ce-MEX, before Bush 43's parting revenge in 2008. They were highly leveraged and lost a lot of their plants due to the recession. The Swiss/French company and the Mexican company produced about 70% of the cement in the US before the Great Recession. They were oligopsonies to we poor equipment suppliers and process contractors. They knew our margins and cut them to the minimum for us to stay in business.
Sorry, I don't have many opportunities to go to full old man mode and talk about the good old days.
Mergers happen because corporations have too much money and because CEO's like them, because they can control nearly every aspect of a merger whereas trying to grow the company through research and development, innovation, increased productivity or investing in production facilities to grow a product line all are messy, they involve a lot of people, a lot of risk, and a lot of boring, detailed work that the CEO can't possibly supervise.
But mergers almost never work out and fulfill the rosy projections of symbiotic magic between the two former competitors. And somehow the savings in duplicate labor never happens either. In a straight buyout the buyer overpays buying the other company's grossly inflated stock with their own somewhat less grossly inflated stock. However, as long as the CEO who pushed through the merger or buyout is still CEO no unfavorable word about the merger or buyout will be spoken. When that CEO retires or otherwise leaves everything that goes wrong in the company for the next twenty years will be blamed on the merger or buyout.
