 My name is Thea Lee, I'm President of the Economic Policy Institute, and I want to welcome you to today's event, the labor market impact of the proposed Sprint T-Mobile merger, which we are co-hosting with our good friends at the Roosevelt Institute. And I wanted to thank Felicia Wong for working with us today, even though she couldn't be here and join us today. So federal and state antitrust enforcers are currently reviewing the proposed merger of Sprint and T-Mobile, which would cut the number of national players in the U.S. wireless industry from four to three. In the past, antitrust authorities have focused their attention in these kinds of mergers exclusively on the impact on competition in consumer markets. The paper that Roosevelt Institute economist Marshall Steinbaum will present today argues that the merger will also have large negative effects on competition in labor markets, and that antitrust authorities should take these negative effects into account when they conduct reviews of proposed mergers. For more than three decades, EPI has been dedicated to promoting the interests of working Americans and their families with a strong emphasis on the need for policies that help to build worker power. We are excited to be able to help promote the kind of innovative strategies for promoting workers' interests that we're going to be discussing today. As Adeel and Marshall argue in their paper, we need much better antitrust enforcement and merger review that includes review of the labor market implications of mergers. But I would also note, as the authors do, that these policies alone are not sufficient to mitigate the ill effects of employer concentration. A theme that runs through the recent research in this area is the idea that collective bargaining can act as an important, countervailing force against concentrated corporate power in labor markets. So without further ado, I'd like to introduce today's speakers. We're going to start with economist Marshall Steinbaum, who is research director and fellow at the Roosevelt Institute. And Marshall will present the main findings and policy implications of his research with his Roosevelt colleague, Adeel Abdelah, who is also here today. And the paper is available for those of you who haven't seen it out front. After Marshall finishes his presentation, attorney Maurice Stuckey, who is of counsel at the concurrence group and a professor of law at the University of Tennessee, will comment on the legal implications of Adeel and Marshall's findings. Unfortunately, Marshall's plane was canceled, so he's not able to be here in person, but he will join us by video. And then, EPI's policy director economist Heidi Schirholz will speak to some of the key economic implications of the research. And the final speaker today will be Vanessa Velalta, a T-Mobile United CWA activist and a worker who will be directly affected by the proposed merger. After the speakers have finished, we will have time for questions and answers. We also have a hashtag for those of you who are live tweeting today's events. It is hashtag, monopsony in mobile, which some of you know is kind of hilarious because of monopsony in motion. But in any case, go ahead, tweet it, because there's going to be some awesome stuff today. And without further ado, welcome Marshall Steinbaum. And thanks to EPI for putting together this project. It's certainly a great opportunity to kind of work on the implications of some groundbreaking research in labor economics that has, in my view, real policy implications. All right, so this paper is called Labor Market Impact of the Sprint T-Mobile Merger. It's joint work with Adeel Abdullah, who's here, and we'll get started. So the Sprint T-Mobile merger is currently being reviewed by federal and state antitrust regulators and sector-specific regulators in communications. And the general tenor of this discussion is whether it is threatening to competition for us to have only three wireless telecoms providers in this country, as opposed to currently four. This sector is already highly concentrated. We know that there's already service issues in telecoms. And I think there are very few people who think, yeah, my wireless contract really great. I'm doing what I paid for, perfect service, totally happy with the way everything's going. So there's good reason to be concerned about yet further concentration in this area. Speaking more nerdily, there's horizontal merger models that are kind of standard issue in this field where you kind of plug in some key parameters regarding the merger in the firms that are merging and say, well, what will be the impact on consumers on prices paid for wireless contracts? And those show that indeed this merger will, according to those models, cause prices for wireless contracts to go up. Moreover, in horizontal merger enforcement, there's something called a structural presumption that dates to key Supreme Court cases that strengthen this country's antitrust enforcement that say, you know, we can just kind of conclude from the fact that it is a four to three merger in a concentrated industry that this merger would violate the Clayton Act. So there's already very good reason to be concerned about the reality of this merger and whether it should be approved by federal and state regulators. What we bring to the table is to supplement that debate with the discussion of labor markets. And to do that, we use some new research that's recently gotten a lot of attention regarding the effect of concentration in labor markets on workers' earnings and showing that, in fact, concentration in labor markets is widespread in the U.S. economy, that by depending on how you define labor markets, most, in some cases, the vast majority of labor markets in the U.S. economy are highly concentrated. I want to kind of step back from the literature on concentration, though, because one thing that I think it's important to emphasize is that the idea of monopsony, that is to say employer power in labor markets, a rise at deviations from perfect competition in economics lingo, arise from more than just concentration of employers in those markets. I would say the key indicators of labor market monopsony are that labor supply is inelastic to the individual firm, meaning if employers reduce wages, they're not likely to lose that many employees or employees are not too likely to leave. Switching the point of view from the worker's perspective, what they earn in wages is less than what they're worth in economics lingo, the marginal product of labor. This is something that EPI has been tracking for a long time now, this famous diagram of the deviation of wages from productivity in the economy. And I personally interpret that very diagram as evidence of rising monopsony power in the U.S. economy. So what causes monopsony power, employer power to set wages? Concentration is certainly one such cause. If you feel like you're getting paid less than what you're worth, you can't go and get paid what you're worth by an alternative employer because there aren't any. And so that's kind of the canonical case of monopsony. That's what the word literally means. But it's not the only way in which employer power to set wages can arise. We know from copious labor market research that discrimination and market segmentation are rampant. And so for an outside observer, you might think, okay, well, there's a bunch of different firms hiring in this labor market or hiring people that look like the people whose wages are low. But in reality, there's not really any alternative employers because those employers are discriminatory because the market is more segmented because people are sort of slotted into a position and they don't really, they can't really just go out and get an outside job offer. And this is a deviation from receive wisdom in economics where if you're not getting paid what you're worth, you can just go get another job offer, find somebody else to pay you. And that just isn't the case. The book to which the just alluded monopsony in motion is a kind of model of rampant monopsony power through search frictions, through the inability to reallocate labor across the labor market, even where it looks like there are many employers that you don't have the canonical concentration in the labor market, but you still have employer power to set wages. And I think that's very important to keep in mind that that's the overall environment that we're working in. I like this phrase, labor is people and people can be exploited. This is historically why labor economists have seen their own subfield as being different fundamentally from what the rest of economics is about, that there's something about labor markets that just means they don't work like the canonical competitive market in economics. Now whether any market looks like that is a different question, but I think we can be very confident that labor markets don't. And again, this gets to what Theo also alluded to, that there's scope for countervailing power in labor markets just sort of by their nature of the exploitative possibilities that exist within them. And I would say for moreover, that's why as much as I'm going to talk about antitrust policy and what that has to say, antitrust alone will never kind of be a solution to the structural imbalance of power that exists within labor markets. So if labor markets are monopsonized as a matter of course, if employers do have market power then that makes it incumbent on antitrust enforcers to consider labor markets as well as product markets in all of their enforcement activities and specifically in merger review because if employers have market power then we would expect that profit maximizing firms would use that power to reduce wages and when there's a merger that kind of by definition increases the market power of employers and thus we would expect them to use that increased market power to make life worse for their workers and for workers in the labor markets where they hire. That suggests a kind of across the board departure from received wisdom and antitrust where the Sinequinon has been consumer welfare and in terms of actual economic observables prices for consumers as being decisive over whether given a merger or certain conduct that the antitrust enforcers are examining whether that is illegal, it is illegal if it harms consumers, the way we know if it harms consumers is that it raises prices for them. That whole sort of chain of reasoning breaks down or at least needs to be supplemented if labor markets are monopsonized as a matter of course and this is what I would say is a broad matter we're encouraging antitrust regulators to do. So what we're going to do in this paper is take a bunch of recent estimates that exist in the economics literature about the effect of concentration on earnings and apply those estimates to the markets that are affected by this merger. So we calculate, we tabulate employment in those markets and then calculate concentration of employment using data that was constructed or gathered by change to win. From that data on employment in individual labor markets we can calculate concentration and then by combining the market shares of the merging party sprint in T-Mobile we can generate a prediction for the change in concentration that will result from this merger. Anytime you calculate concentration in an antitrust context it is kind of, I should say you first have to decide what the right market definition is. This idea of market definition is extremely important in antitrust and so the question is well, I mean there's lots of principles that could potentially guide what do we look at when we try to define a market. There's Supreme Court rulings that say well there's two elements to market definition, one is a geographic market and the other is a line of business. So you have to sort of choose both dimensions when you define a labor market. So what we've done in this paper is take the employment in all of the retail stores owned by the merging parties, their competitors AT&T in Verizon including their authorized dealers and their prepaid affiliates. So that is the line of business that is retail wireless services and retail wireless services and then the geographic definition is what's called a commuting zone. This is a kind of delineation of the United States into geographic areas that are defined by commuting patterns of people to other places in those areas. So the idea is that it may be that some people commute across the border of a commuting zone, but most people will commute within the geographic boundaries of their commuting zone. The papers that we rely on to generate the estimates that we use, none of them have exactly the same market definition as that market definition, but the specifications that we've drawn from each of the papers are what we think is the most comparable market definition and therefore the most comparable estimate of the effect of market concentration on earnings that come from each of those studies. So if you look at this equation that I've put up on the screen here, the HHI, Herfindahl-Hershman Index is a measure of concentration in labor markets that we're getting from the change to win data. The beta hat is the effect of changes in earnings or changes in concentration on earnings. The beta hats come from these four economics papers that estimate the effect of concentration on earnings. And then the left hand side of this equation is what we're estimating with this whole exercise that is the change in earnings that will be the result of the change in concentration arising from this murder. We have three papers and from those three papers we're taking a total of four estimates of the beta and we're gonna see, we'll see first the right hand side. This is the change in concentration, the change in HHI that will result from combining sprint and T-mobile within the wireless retail markets that I just described. This is, you can't see the names of the commuting zones, but this is by commuting zone in the US economy. And the legend, which may also be a little bit hard to see given that it's small, basically tracks the change in concentration that the federal antitrust agencies horizontal merger guidelines point to as driving concern, enforcement concern in merger review. So the federal horizontal merger guidelines that is to say the sort of broad economy wide notification from the agencies to the business community, what do the agencies look for and review for when, whether a merger might trigger enforcement concerns. They'll say, well, if the concentration in the relevant antitrust markets increases by more than 200, that would be a cause for concern. And here what we see all of the red commuting zones in this map have a change in concentration that's more than 200 HHI points. All of the green areas are the areas that are not affected by the merger according to our methodology because they don't have employment by one or both of the two merging firms. So what this map tells you is basically wherever both of these two firms are active, almost in all of those places that would trigger enforcement concerns because in almost all of those places, the change in concentration is more than 200 HHI points. I have another map in the paper which I didn't put in this presentation that shows the exposed concentration in all of these labor markets after the merger, and it shows that if this merger were to be approved, according to our predictions, literally every market in the country defined in this way would have an HHI above 2,500 HHI points, and that is also a trigger for enforcement action according to the Federal Horizontal Merger Guidelines. So again, this is what you see in this map is what goes in the right-hand side of that equation. This is what comes out on the left-hand side given each of the different estimates of beta hat that we take from these papers. So these are histograms that show number of commuting zones on the y-axis, and for each of the specifications, what you're seeing on the x-axis is the percent change in earnings that's predicted as a result of this change in concentration. So again, we get the change in concentration market by market from the change to wind data. That translates into a percent change in earnings using the point estimates, the coefficient estimates that come from the four papers that we use. Yes, I think these mobile phone contracts are generally not sold online. I think there is only a brick-and-mortar employment. Is that not true? OK. Well, no, so this is brick-and-mortar retail employment. Yes. So these estimates are different depending on which specification you're drawing from. I would say, though, by economic standards, they're actually pretty similar in the sense that all of the papers that have studied this issue, which I have not drawn on all of them to write this paper, they all find negative effects of concentration on employment. They all have specifications beyond the ones that we use here that find that that effect is robust to including lots of other controls that might also impact wages or that might be omitted variables that explain both concentration and wages. So I didn't include those because in some sense, they're more robust estimates of the effect of concentration on wages, but they're not comparable market definitions to what we have from the change to win data. I should also say that, according to the law, basically any negative effect on competition is considered to make a merger violate the Clayton Act. So here you can see this distributed in the maps. The first two specifications are both from the paper by Azar Marinescu and myself. We take two specifications from that paper because they're two sort of different methodologies for estimating these effects. And the instrumental variables methodology, which is supposed to be better at ascertaining exogenous variation in concentration, actually finds the larger magnitude of the effect of concentration on earnings. If you can't see the legend here, the red is a change in weekly earnings that's greater than $10, or decline in weekly earnings that's greater than $10. And oranges between 5 and 10 and yellow is greater than 0, but less than $5. Yes, the IV is the bottom map. And these two maps come from the other two specifications, Ben Bergman and Kim and Kevin Rins. And basically the point to estimate in those specifications is what drives the variation between these four estimates. The change in concentration is the same since that's just coming straight from the change to win data. That's the same for all four of these specifications. All right, so to conclude, anti-trust enforcers have to take competitive effects in labor markets into account as a matter of course. This is something that they themselves have agreed to, at least publicly. They say that if there's a decline in competition in labor markets that's just as illegal under the Clayton Act as a decline in competition in product markets, but there's precious little evidence of them actually doing it, so the whole kind of motivation for this paper is not just to speak, to predict the effect of this merger, Sprint and T-Mobile, but also to provide a model to the enforcement agencies as to how they could incorporate labor markets into merger review, given that they themselves have said that they should be doing that, and they currently aren't. What part of the reason they've said they currently aren't just because they lack the data to evaluate the effect of mergers in labor markets, so I would encourage them to acquire that data, and one way they could do so is through the Hart-Scott-Rodino process, so it used to be that mergers were just as illegal, but they would basically be found to be illegal after they'd already occurred, and that was deemed to be an inefficient way of enforcing the law, so now there's a process whereby a merger cannot be consummated unless it goes through this process, and the process includes surrendering proprietary data to the enforcers so that they can investigate the effect of the merger ex ante and say, well, challenge it or not challenge it, and that process should be made to include labor market data. There's no reason why it couldn't if there are also of the opinion that reductions in competition in labor markets are potentially illegal under the Clayton Act, and that should be comprehensive. It should include job histories, since in many cases employers do have a date on those things, and it should include whether they employ restraints like non-compete clauses of their workers. I would also say it should include demographics, since I was alluding to before monopsony power often takes a form of discrimination and market segmentation. There's sort of more general research on labor supply elasticity to the individual firm suggests that that is very low, that in response to a reduction in wages, most workers will not leave or the wage reduction would have to be very large in order to make people leave. The chairman of the FTC himself said that that is the principle that should guide how labor markets would be defined for antitrust purposes, and if that's true, then labor markets are small for antitrust purposes, which means that most employers would likely have market power under the law in labor markets. That's quite significant for the possibility of enforcing the antitrust laws against employer power in labor markets. Just last week, the chairman of the FTC said in congressional testimony, he was asked about non-compete clauses and whether the agency would take action against them, and he said, there's lots of circuit, while he was saying, well, yes, we could, but there's lots of circumstances where the company that's imposing the non-compete doesn't have market power. I think that that's a nonsense statement. As far as economics goes, if you're imposing a contractual restraint on workers without compensation, that is an exercise in market power. What he means there is that the antitrust law only recognizes a very small definition of market power, that is to say, concentration in a well-defined antitrust market. I was just talking about how concentration, how antitrust market should be narrowly defined according to its own principles, but I have also proposed with Maurice Stuckey, who's also here today at Spirit, that definition of market power should be defined more expansively, including to include something like the ability to impose contractual restraints without compensation as being itself evidence of market power. So I would say as an economist, the statement that there's circumstances where a company imposes a non-compete that doesn't have market power, that's nonsense, and that should be made in the law that that's nonsense. Thank you very much. Look forward to a discussion. Thank you so much, Marshall. I think that was an excellent set of research and an excellent presentation. I probably taxed a few people's back to your econ 301 days and grad school days, but this is such an important issue and it's important research and we are looking forward to hearing from Maurice Stuckey next, attorney Maurice Stuckey, because this is actually an economic argument that could very well have a lot of implications for how lawyers look at antitrust cases going forward, both with respect to mergers and so on. And I see that Maurice has joined us virtually. So Maurice, thank you so much. Sorry, you couldn't be here with us in person, but we're looking forward to hearing from you. We'll actually leave Knoxville. So I apologize, not being there. So what I'd like to do is... We'll actually leave Knoxville. Marshall and Adeel's paper in context. So what I'd like to do, so first I wanna look at the market power problem. Marshall and Adeel's paper in context. Second, look at one key policy tool to address the market power problem, currently, namely antitrust merger review. Third, to discuss a major policy tool to address the merger review, namely it's preoccupation where the mergers likely affects downstream. Third, to discuss a major blind spot and its inattention to the likely competitive preoccupation with the mergers could include downsellers and workers. And then finally to bring this home than the U.S. over the past 35 years. So the first thing is that there's growing evidence of a market power problem in the U.S. over the past 35 years. So Marshall pointed out... The first thing is that there's growing evidence of a market power problem in the U.S. over the past 35 years. So Marshall pointed out that any U.S. industries are now becoming increasingly more... The innovation levels are all concentrated. The profit margins are widening for the European Commission. And what we found from the recent economic studies is that there's declining competition is partly responsible for a lower rate of investment in the U.S. education. There's also been a slowdown in the creation of new businesses as Marshall pointed out the U.S. labor markets have become less fluid. There's also been a slowdown in the creation of new businesses as Marshall pointed out the U.S. labor markets have become less fluid. Another disturbing sign in the U.S. is how the share of income going to capital has risen and the share of income going to labor has fallen. Another disturbing sign in the U.S. is how the share of income going to capital has risen along with the share of income going to labor has fallen. So in the Mountain evidence, all points to this called these trends along with the growing income and rate of profits falling fewer hands. And traditionally one important policy tool to prevent the market power problem was anti-trust. So historically anti-trust was meant to prevent one firm or a handful of firms from a foreign significant market power. And so historically anti-trust was meant to prevent one firm from a handful of firms from a foreign significant market power. And so the impact wasn't just merely on our laws, it was also on our autonomy, on our well-being, and on our democracy. So the impact wasn't just merely on our laws, it was also on our autonomy, on our well-being, and on our democracy. And one way to address the market power problem was through 1950 and Congress amended as the court said the dominant theme for debating congressional consideration of the 1950 amendments was a fear of the rising tide of economic concentration in the American economy. And to arrest this rising tide of men's concentration was a fear of the rising tide of economic concentration in the American economy. And to arrest this rising tide towards concentration was to preserve competition among many small businesses to clamp down a bigger trend towards concentration in its incipience. The goal was to preserve competition among many small businesses by the marketing trend towards concentration in its incipience. And section seven was meant to arrest this trend both to the point that the market was left as well as upstream markets. And section seven was meant to arrest a few decades. We actually had robust as well as upstream markets. But we also had other important safeguards, like powerful unions. We actually had robust, but then that changed in 1980. But we also had other administrations adopted the more law-safe beliefs of the then Chicago school. But then that changed in the FTC and the DOJ allowed regular administration while highly concentrated industries. And the focus was primarily downstream and primarily on prices that consumers pay or highly concentrated industries. And the focus was that the DOJ and the FTC got it wrong. And primarily on prices that consumers pay. And even on this dimension it seems that the DOJ and the FTC got it wrong. And what he found was that 75% has done some research in all the available post-merge reviews. And what he found was that 75% of these post-merge reviews got it wrong, often got it wrong downstream. And they never really looked upstream on sellers and workers. And this was wrong. Let me give you this example. I really think it brings it to the fore. And they never really looked upstream on sellers and workers. It announced its acquisition of favorably transport. Now these were two of the three largest railroad equipment suppliers in the US. And the DOJ opened an investigation for one year, it studied this merger. It eventually entered into a consent decree where favorably had to divest its US freight car freight car break business to a third party. But the DOJ only looked at the downstream effects that this merger might have. Like what impact would it have on customers? It never really considered how this merger might affect workers upstream. And if they had only turned their gaze upstream, what they would have found was that at that time, Westinghouse favorably and Noor Bremser were illegally agreeing to not poach each other's employees. So they were basically engaging in a hardcore cartel. They were agreeing not to recruit, solicit, hire or otherwise compete for each other's employees. So not only is this per se illegal, it also shows that the merger was likely to be anti-competitive for these labor markets upstream. Typically what the agencies do, and I was at DOJ as well, is we wanna see is the industry susceptible to collusion? And evidence that the industry is susceptible to collusion is if the parties had previously colluded. Here they were actively colluding in this industry. So while the DOJ was investigating this merger, the parties were actually colluding and these were the senior executives and they were being deposed by the DOJ. Now you might think this is really brazen, but it's actually perfectly rational because the executives had very little to fear that the DOJ and the FTC are preoccupied with the downstream effects and they never really looked upstream. So here it cleared the merger in 2016 because the DOJ did not look up. The companies continued colluding until the DOJ challenged this behavior two years later in 2018. So my important point here is that in order to get the merger review right, you have to look at both the upstream and the downstream effects. And another key point that Marshall brought out, and this was also an important paper by another economist Glick that Marshall cites, is that by not looking upstream, you can actually get it wrong twice. You can now consider as an efficiency reduction in wages, which might actually be the exercise of market power. So that's really problematic because now you're crediting to the parties a merger specific efficiency, which is actually anti-competitive behavior. So it's not just bad news. We've got some good news as well. The good news is now the DOJ and the FTC in recent congressional testimony have promised to look upstream. The head of the anti-trust division said recently that the traditional Philadelphia National Bank presumption that Marshall identified, as well as the HHI concentration levels that Marshall and Adil calculated can be used to predict anti-competitive effects upstream. Basically, if it exceeds the thresholds, then the merger is presumptively anti-competitive. And the FTC chair testified that his agency will access a proposed transactions potential effects on the labor market. So in my last minute, let me just talk quickly about Sprint and T-Mobile. This is a merger that's ripe for the analysis that Marshall and Adil did. Because here you have a concentrated industry for major operators nationwide. Many of these retail labor markets are already highly concentrated and will become significantly more concentrated as a result of this transaction. The merger is presumptively anti-competitive, both upstream and downstream under the HHI thresholds as well as Philadelphia National Bank. And this appears to be also the first attempt by Marshall and Adil to examine the magnitude of the harm. Although the Clayton Act doesn't require it, they go an extra step and they predict what the likely impact this would have on wages. So this is a timely study for an important merger that's going to have broad ramifications in our economy. And it's really important that the agencies look upstream and I think that this study will help them do so. Thank you. Thank you so much Maurice for that legal context and a little bit of history as well. And we're delighted that you were able to join us even remotely. It worked really nicely for a change. And next we're delighted to have EPI's own policy director Heidi Scheerholz with the economic implication. Thank you, I appreciate it. And thank you Marshall and Adil for the fantastic work you're doing. I'm absolutely delighted to be a part of this panel. So this work adds to the recent extremely exciting new research in labor economics that emphasizes that employer power in, wait, I'm getting lots of signals. Is that, okay, okay, thank you. Okay, it adds to this exciting literature that shows that wage effect that employer concentration in labor markets can have a significant negative impact on workers' wages. And in particular, this paper adds to that literature by showing how those wage effects might play out on the ground in the event of this proposed merger between Sprint and T-Mobile and by modeling how antitrust enforcers could start taking into account the labor impacts of proposed mergers when they are deciding whether or not to approve them in the future. So Marshall went over the results but I'm just gonna state a couple of the key ones again for just to bring home the take home messages. So they find that earnings in the retail wireless services sector broadly in the 50 most affected labor markets nationwide would decline by somewhere between $10 per week and $63 per week on average. For a full year worker, this translates into an annual loss of somewhere between $520 and $3,276 and it just, it goes without saying that these are meaningful amounts to the working people in these jobs. And I just wanna emphasize that the fact that this effect is not just for workers in Sprint and T-Mobile, this effect is for workers in the entire retail wireless services sector in each of these labor markets. And to understand why that is, it's useful to sort of think of the logic behind it. The key way that non-unionized workers can secure decent wages is when their employer knows that they could quit their job and get a decent job at a competitor. When the number of firms is reduced because a merger happens, that means that even if your firm was not involved in the merger, the number of firms, the number of competitors that you could work at just went down. That means the threat that you could quit your job and get a decent job somewhere else also just went down. So the merger would reduce the leverage of workers in the entire sector, not just in workers, not just of the workers of those two firms. So that means that Verizon wireless workers, AT&T mobility workers will be negatively affected right alongside Sprint and T-Mobile workers. And it's worth noting that AT&T mobility workers are unionized, and I'm gonna talk about that impact in a minute, but it's worth noting that the fact that they're unionized would certainly help mitigate the wage losses for those workers, but of course, the next time contract negotiations come around, the reduced prevailing wage in the sector will really hamper their bargaining position. So it will have this long-term effect even on unionized workers in the sector. Okay, another key point I wanna make is just how important the literature that this paper is a part of really is, and I would just like to apologize to all of my EPI colleagues who have already heard my shtick about why I love this literature so much. I'm going to tell it again. The thing about this literature is that at this work, the work that Marshall has done in this paper and other work that Marshall and colleagues have done, it identifies one way employer power and labor market can have a significant negative impact on wages. It's enormously important for many reasons, but one of the reasons is what it is a departure from. It's a departure from the idea of perfect competition, and Marshall got into this a little bit, and I'm gonna say a few more words. So perfect competition is the model that underlies most economists' thinking about the way most of the labor market works. And to give you an idea of just what that means, it's worth talking about what the assumptions are that underlie this model. So the key one is that workers are paid their marginal product, and that's essentially what the value of your worth is, what your, the value of your work is to the firm. And I, and Marshall was doing this too, I'm gonna use the word worth in this context, and it's just, we're just using it as shorthand to get at this impossible to measure, but sort of standard concept in economics about essentially the value of your work to the firm. So a key assumption of perfect competition is that employers don't have the power to pay workers less than what they're worth. They don't have the power to pay workers less and then keep some of the fruits of workers' labor for themselves. So that's the main one. The other assumptions related to that are workers, if they are paid less than what they're worth, they can instantaneously find another job where they are paid fairly, and then the employer that had the audacity to pay them less than what they're worth, if they don't start paying their workers fairly, they will instantaneously go out of business. So those are the assumptions that underlie perfect competition. And I think it's, I wanna just say two things about that. I don't think any economist likely believes that this is literally true, but it is, but what I also believe is that most economists actually believe that that is a tolerable enough approximation to the labor market that they're totally fine having those assumptions underlie the way they think about most of the labor market and you see it popping up all the time. So think about minimum wage debates. It's the one, maybe it's an easier one for everyone to sort of wrap their brain around. We know that every time the idea of raising the minimum wage comes up, people trot out these econ 101 models that say if you raise the minimum wage, that's gonna cause job loss. What is important for us all to know is that the things underlying the model that gets that result, that if you raise the minimum wage, it's gonna cause job loss, are the assumptions of perfect competition. Like that result, a result from the fact that workers, the assumption that workers are paid exactly what they're worth, that employers are not able to pay them any less than what they're worth and keep some of the fruits of their labor for themselves. If you relax that assumption and instead allow for the possibility that employers may actually be able to pay workers less than what they are worth, then the model doesn't predict that you'll see job loss if you raise the minimum wage. And we all know that the empirical studies that come out have shown exactly that, that the wage increases that we have seen have not caused job loss, pointing more to the fact that these ideas of perfect competition, they're just not accurately reflecting the labor market. So the work that Marshall and his colleagues are doing that shows that employers have the power to suppress wages is extremely important in getting the economics field to grapple with this idea that maybe, just maybe, perfect competition isn't a good way to characterize most labor markets. And then I said I was gonna talk about this. I wanna just mention one thing that's important to note around this is that traditionally economists with their models of perfect competition have been totally complicit in providing justification for the idea that anything that does provide workers power, like minimum wage increases, like boosting unionization, that those types of things will cause job loss. They will hamper growth. They will reduce efficiency in the labor market. And one really important thing that's coming out of this round of literature is that there are the findings around unionization. And in particular, the finding that the wage suppressing effects of concentration are actually less when workers are unionized. That is not surprising, I am sure, to anyone in this room, when we are not in a perfectly competitive world, which we know we are not, and employers have the power to set wages below what people are worth, then things that boost workers' wages, things like strong labor standards, things like unions actually increase efficiency in the labor market. And both Marshall and Maurice made this point that that is very relevant to antitrust policy because traditionally, in the antitrust setting, it was only the suppression of input wages. The suppression of input prices, including lower wages, has simply been seen as efficiency enhancing because it reduces the price to consumers. But when you let go of the idea that labor markets are, when you let go of the idea that labor markets are perfectly competitive, we know that lower wages lead to fewer workers and lower output, which reduces efficiency. So as Marshall points out, the antitrust enforcers who review proposed mergers need to start taking that into account in a real way. And I know my time is waning, and the last point I just wanna make is that this whole discussion helps us understand what has been at the heart of rising inequality and largely stagnant wages for most workers in recent decades. We know that far from being perfectly competitive, where neither employers nor workers, for that matter, have the power to set wages, most labor markets are better characterized by sort of a tug of war between employers and workers for who gets what share of the growth in the American economy. Employers inherently have power and policy, policies like policies to support unions, policies to support labor standards in their enforcement, used to provide strong countervailing power to workers so that there was more balance in the labor market. As those things have been decimated through deliberate policy choices, worker power has collapsed, increasing employers relative power dramatically and leading to the rise of inequality and stagnant wages for most workers. And so all of this provides a really clear roadmap for what to do to reverse the trends. So Marshall and his colleagues are pushing a really important way to fight wage suppression through antitrust. It's incredibly valuable. And alongside that, we just need to continue to fight to restore and enact policies that provide workers countervailing power like maintaining full employment, like labor standards in their enforcement and like policies to boost unionization. Thank you so much Heidi, the inimitable Heidi Shearholz. And I wanna say, even having heard that less than a week ago, it just gets better with time and with repetition. So I'm not bored, am I? I'm sure nobody else is either. And our last speaker, we're delighted to have with us Vanessa Velalta. We wanted to have the voice of an actual CWA, T-Mobile worker with us today. And I think Vanessa's gonna provide some really interesting context for this very technical discussion. So thank you and welcome Vanessa. Hi, good afternoon, thank you. My name is Vanessa Velalta. I am a mobile expert, also known as a retail sales representative at a T-Mobile store in Houston, Texas. I have worked as a retail sales rep for T-Mobile for the past five years, first in a mid volume store and now in a high volume store. I am a proud member of T-Mobile Workers United CWA. T-Mobile Workers United is an organization of T-Mobile and Metro employees joining together for a voice and a fair treatment at T-Mobile and Metro. We are hundreds of call center reps, retail associates and technicians and we have come together as TU to support each other and work towards positive change at T-Mobile, USA and Metro. Unfortunately, as a member of TU, I do not have the protection of a union contract at work. T-Mobile has fought our attempts to organize as a union and win collective bargaining rights on the job. It is my understanding that T-Mobile has more labor law violations per employee than any other company in America and that includes Walmart. It is ironic because T-Mobile's German parent has a good relationship with its union in Germany and it is also my understanding that Sprint is an anti-union company. So let's be clear, the merger of T-Mobile and Sprint will bring together two aggressively anti-union companies. In fact, AT&T Mobility is the only unionized wireless company in the United States. I have listened to the economists discuss the ways in which the merger of T-Mobile and Sprint will increase the ability of the merged T-Mobile to depress wages of workers at the new company. As a frontline T-Mobile worker, this makes sense to me. I can tell you from experience that retail wireless workers frequently move from one wireless company to another. If we've had bad managers or sales quotas become unreasonable or they reduce our commissions, we'll often quit work at one wireless store and look for work at another wireless company store. In my own store, there's one sales rep who's come from AT&T and another who's come from Verizon. There's so much turnaround in our stores that this is actually quite common. I would also add that we sign a non-compete for 60 days and I believe sometimes it's longer for management as well. We think of ourselves as skilled professionals selling wireless equipment and services. This is how we are different from sales representatives selling computers or other electronic equipment. We sell equipment and service plans. Those plans are complicated, change often, and it takes a lot of training to keep up with the changes. We also need to have a really good interpersonal skills because we have to figure out what a customer needs. Is it a family plan? Do they need unlimited data? Can they pass a credit check or do I need to focus on a prepaid plan? I can tell you that my coworkers are very worried about our jobs after the merger. We saw a video of T-Mobile CEO John Ledger telling senators in a congressional hearing that after the merger, he would rationalize the number of stores cutting jobs. This only makes sense. You can see from the maps you can see from the maps that Sprint and T-Mobile stores and those of the prepaid brands Metro and Boost are quite close to each other, often on the same street corner. After the merger, the new T-Mobile will close redundant stores and guess what? I fear that me and many of my coworkers will be redundant as well. This means that we will be out on the street looking for jobs. CWA's research finds that 3,000 of us are likely to lose our jobs after the merger. So that's why CWA says this merger should be blocked unless T-Mobile commits to regulators that it will not lay off employees as a result of the merger and will agree to respect our legal right to have a union on the job. Thank you very much. Thank you so much. I think that was a terrific panel and we had a lot of different perspectives on there about economics and legal and from the workers themselves. And we are gonna just go ahead and open it up to questions from the audience. Please wait for a microphone, which will come around to you up here, right here in the second to last row. And please state your name and your affiliation if you have one, thanks. Yes, thank you very much. I'm Carolyn Byerly from Howard University. I study media mergers in my spare time. But I'm particularly interested in the impact on women and minorities. You didn't break your demographics down. You've looked at workers as a broad category. You also haven't talked about job classifications. Are you able to do any of that? The answer is not in the specific project that we've done here, the data that we, at least I have used with my co-authors on job posting that has enabled us to draw our conclusions about earnings. It tells you a lot of information about the job, but not necessarily about the people who would be taking the job. But I agree with you that that is a crucial dimension to examine. There's been excellent research to my mind tracing, especially the sort of gendered aspect of the labor market to monopsony power on the part of employers that women systematically have access to fewer job opportunities that they're more locked into any one particular job that this gives their employers power to pay differentially. I think one of the best papers that speaks to this question recently looked at firms that had patents granted versus firms that applied for patents but didn't have them granted. That was the sort of source of variation was whether you did or didn't have your patent accepted and it found that when firms have their patents accepted, workers' wages at those firms go up but only the men's wages go up. Women who worked at those firms experience no increase in wages. I mean, I think that tells you sort of how the bargaining power is shared out within the firm and I think that arises in large part because of the difference is in outside options available to workers within the firm. So I think one of the most promising areas if I could say be so bold as to say that in terms of expanding the research agenda on labor market monopsony is towards trying to explain the gender wage gap and other gendered aspects of the labor market. Heidi, do you want to? You know what, I'll just say one thing that has helped me with the intuition of that that might be useful for other people. If you just think of workers, employers have sort of monopsony power over you. Anytime you can't instantaneously quit your job and find another job if you aren't being paid fairly and because of pervasive discrimination in the labor market on the basis of both race and gender that's just less true for women and minorities that you could instantaneously find another job where you are paid fairly. And so when we're talking about concentration as a form of monopsony power that it's just when your outside options are cut it's just gonna have a disproportionate effect on wages and on women and minorities for that reason. But I agree it's not super well documented so it's really ripe area for more research. If I could just add again, I think this is actually a totally virgin area for antitrust to get into and that it absolutely should go there because I would say things like disparate impact on racial and gender minorities of anti-competitive behavior-like concentration for example are recognizable in the economy and they should be recognizable in the law and I think that that's something that people who are interested in reforming the policy should be kind of putting front and center. Carolyn did you wanna follow up? Hold on, wait for the mic. Yeah, I mean I guess I'm really stunned at this. I mean we've had all this legislation passed around job equality and you know, Title VII and so forth and so on. I tried to get a breakdown by gender from communication workers of America they won't even tell you what their union, I mean what the demographics are within their unions and I don't know what the holdup is in the research area. I mean why is this not being done? It's so important, it has everything to do with what's going on right now. I can only speak to that very important point in general terms and that is as a labor economist, well you're certainly trained to view disparities on the basis of race and gender and other dimensions as important to labor market outcomes but tying those to the power of employers that is to say to look at the other that's viewed as a worker characteristic and that there's a whole research agenda involved in investigating the sources of differential pay and working conditions on the basis of worker characteristics to sort of go to the other side of the bargain so to speak and look at employers and their role in setting the labor market package so to speak available to workers. That's kind of a whole different question that labor economists are only just now kind of getting into realizing is a big deal and I think I guess to look at the bright side, I mean definitely the glass half empty is why haven't you done this and decades of supposedly researching these issues given how important they are. On the other hand, the glass half full is these are people who have developed very finely tuned tools for detecting causality in the economy and in labor markets in particular and the idea that they would take those very finely tuned tools and look at employer power, look at the other side of the table so to speak, look at the concentration of corporate power kind of across dimensions in the U.S. economy. I think that portends very positive developments intellectually speaking and hopefully for policy as well. Okay, let's move on, one in the back there and you can see that Maurice is joining us for the Q and A, I'm gonna actually summarize the question so that Maurice can hear them because of technology. Carl Polzer and I started a project called the Center on Capital and Social Equity, Studies in Equality and Encourages Inclusion. So I have a couple things to ask about, one is I do agree that it's good for the antitrust regulators to check for monopsony power but I think this case, I think you might be confusing markets because there's a market for selling phones and there's a market for labor and in this case sales is a very large market goes way out well beyond this particular trade. I mean I have friends who sell wooden pallets and they move on to sell advertising and how much training does it really take, okay? So I think the relevant market could be very large for labor here. The other assumption that I do agree that perfect competition practically doesn't exist and if it did end labor market the price of labor would tend to go down to the point of getting very little. But I mean counterfactual to explore would be what if under what conditions does labor have the most leverage in this tug of war? Okay. Having lots of competitors or just one monopoly? If there's just one monopoly, labor might actually have more leverage because they could split the rent with the monopolist and they could have leverage to shut down the whole system for the whole country. Which would give strike a great deal of power. So I'm not sure I'd buy a couple of the assumptions on this. Thanks Carl and that's a lot there. And let me just summarize for Maurice. That's Carl Polzer. And the first question was that while he agrees that antitrust regulator should check for monopsony. The question is whether the sales market is really much broader than just retail phone and whether it should be all retail and how much skill does it need. And I'll let Vanessa take that as well as Marshall and maybe Maurice. And the second question I think Marshall and Heidi, if we did have actually a perfectly competitive labor market, would the price of labor go up or down and how does that fair? So, about the kind of skills, firm specific skills that are required in your work. Hello? Okay. As far as skills wise, I mean, we are selling cell phones equipment. But I mean, it's also everything that goes into play with how those devices work, along with all the services that we provide. Cause it's not just cell phones, it's anything from tablets to other devices that they've put into play. GPS trackers for cars, how that plays into for business and personal. To be honest with you, it's actually about a month, the least, as far as training in an actual, I guess you can say classroom setting, and then you still have to go on the floor. And I mean, I would say you're still, you learn every day actually, every day we go in, there's something new that's on the market, something new that came out. So, I mean, it's not just one specific month, it has to do with a lot. And Marshall, do you wanna talk about how you define the market for your paper? Yeah, well, I do wanna talk about that. I also want to just mention that, to just sort of drop a bomb of economic nerdiness on this, the principle that the chairman of the FTC said should guide market definition as firm specific labor supply elasticity, that is a parameter that pertains to how likely would employees be to leave, given a reduction in wages of a certain amount. And that is a question on which we have a significant amount of new research coming from, I think some very creative types of economic experiments that all point to that number being very low, meaning that workers are quite locked into their particular job. So I'm thinking of a paper about the Amazon Mechanical Turk environment where the jobs are extremely repetitive and everyone does them, well, I don't know about everyone, but it's possible to do them from your home. You just need an internet connection. In theory, the search costs are minimal because all the jobs are right there in one menu and it found that employers have an enormous degree of monopsony power in that context that I think the parameter in question was like 0.1. That is an extreme amount of monopsony power to the point that every single employer on the Amazon Mechanical Turk environment would be considered a monopsonist from the perspective of the antitrust laws. Again, this is what the chairman of the FTC said is the guide to policy in terms of defining labor markets for monopsony power. And that, again, is the context in which we would expect to see the least amount of monopsony power because the switching costs are lowest and it's easiest to switch jobs. So even if you can see in the economy that there are people who would say, you know, to have a different type of retail job and work in wireless mobile or vice versa, the reality is that many employers do exercise monopsony power over their employees. I know this from my own work on geographic mobility. You know, I used to present my own dissertation that had to do with that subject and people would say, well, you know, why don't people just move to wherever? You know, if they can't find a job, you know, it's not that hard and, you know, okay, that's your point of view, but that isn't actually the reality of how people experience the economy. So I'm not, you know, the, you know, I would say antitrust can really easily run aground on these kind of abstruse questions of market definition, where the, if you look at empirical data, as opposed to sort of people's general feeling, like it's not that hard to switch jobs if you're not the one who's actually doing the switching, you know, that really points to, I think, narrow market definitions and pervasive market power. Thanks, Maurice. Did you want to add anything on this particular issue or either the questions that were raised? Yeah, if I could, two points. I mean, the first point is, I think it's important to understand why we define the relevant market. We only define the relevant market to determine whether or not the firm can exercise market power. So think of it as circumstantial evidence. If you have direct evidence of a homicide, you wouldn't then need to rely on circumstantial evidence. So if we have direct evidence, for example, like in the fast food industry, firms exercising market power through no poaching agreements, that is indicative. You might say, well, a fast food worker is probably the least skilled worker as the greatest mobility, but yet if firms can exercise market power there, as was recently found in one economic study in the Washington State AG's office, challenged it, then that is sufficient for antitrust purposes. You just need to get at the issue of market power either through direct or circumstantial evidence. And the second point about leveraging, if you have then a monopoly and they could split the surplus, then with, let's say, a union, that's one parameter of competition, but then you have to think then of what are the other implications that having concentrated economic power on innovation, choice, autonomy, and also what about the political risks when you have concentrated economic power? So the fact, I mean, I don't really see then splitting the rents that by itself is determinative. We've made a decision in our country long ago to disperse economic power as well as political power as a way to promote our democracy. Right, Heidi. I'll just say one other thing on this question of would workers be better off if they under monopoly where they could, unionized workers could then split the rents with their employer. It's worth, in addition to what Marie said, it's worth noting that 93% of the private sector is not unionized. And so it's just not relevant for the vast majority. At this point, we're hoping that unions will, we need a different world, right? But at this point, it's just not relevant for the vast majority of private sector workers. Hi, I'm Kayla with Global Competition Review. I'm curious why the CWA supported the AT&T T-Mobile merger and is now posing the Sprint T-Mobile merger. Wouldn't those have similar effects on the labor market? If anybody just has thoughts on that, thank you. We look first and foremost, not exclusively, but first and foremost upon the impact that a merger will have upon the people who work at the company. When the AT&T T-Mobile merger was announced, AT&T said to publicly and to CWA that if the merger was consummated, that the T-Mobile employees who had been trying for over 10 years to get a union would have neutrality in order to determine whether they wanted a union at their workplace. In addition, AT&T at that point said, there is offshoring going on just as there is between Sprint and T-Mobile. And we will bring back 5,000 jobs. CWA thought those were positives. We did say, when the merger was reviewed, that regulators should ensure that the merger would result in increased investment and upgrading and that it would not have a negative impact on consumers. So with those conditions, we saw positive. In this situation, I really have to go back to when Deutsche Telekom bought into the US market when they bought a wireless company called Voistring. At that point, CWA reached out to our sister union in Germany called Verde, and we said, what kind of employer is Deutsche Telekom? We were told, we have a really good relationship. Of course, German labor law is very different. The union represents 50% of the seats on the supervisory board and there's a very positive relationship. We then went to Deutsche Telekom, the president of our union, and we said, if you buy into Voistring, will you stay neutral when employees expressed an interest to have a union? And our president of our union was told, yes. The merger went through. Voistring employees began to try and organize. And T-Mobile management at that point and every year since has violated labor law in order to squelch employees' rights. This we do not see as in the public interest. The FCC looks at employment. We've looked at what the employment effects of this particular merger are. And just the reduction you saw the maps in the number of retail jobs will result in the loss of 25,500 retail jobs. Those are community jobs, the person who asked about impact on women and people of color, particularly the prepaid brands, which are located in lower and moderate income communities, higher people from those communities, the authorized dealers tend to be small businesses from those communities. So among those employees, there is an overrepresentation of people of color. And we looked at all of these factors. We have said, as Vanessa said, if this merger, you were to have verifiable commitments by the management that there would be no job reduction for employees and a recognition, a real recognition, of neutrality when people want to exercise the illegal rights. Those would be public interest benefits. But we have not been able to get that agreement either publicly or privately. I hope that answers your question. Thank you very much, Debbie, for stepping in. That was helpful. Anybody else have anything to add before we move on? OK. Let's see somebody who hasn't yet had a question up here. Hi, Thomas Ayala with National Taxpayers Union. As you may be aware, T-Mobile Sprint said if they were approved, they would invest $40 billion into 5G. I was just wondering if you took a look at that, how that could affect the job market, their studies that show 5G could add a half a trillion dollars to the economy over the next couple of decades. So just wondering if that would have a positive impact on the economy. And I don't know if Maurice wants to answer that. So Maurice, the question is from Thomas Ayala from the National Taxpayers Union about T-Mobile's promise to invest in 5G if the merger goes through. Maurice, is that something? Yes. So I should disclose that I'm with the concurrence group, and we filed comments on behalf of CWA. And as part of our analysis, we look to see their claims that the merger is necessary for them to invest in 5G. And what we found is that it's not necessarily the merger is not necessary for that to happen. In fact, CWA has identified numerous statements made by executives from both entities where they outlined their commitment to invest in 5G. And there's nothing to suggest that investing in 5G is merger specific. Based on what they're telling their investors, it would seem to suggest that even if this merger were blocked, they would then continue to compete. And that's what we typically rely on in an industry such as this. We rely on competition to force each company then to invest. And that's what our general thesis has been. Yeah. So I haven't looked at the specific cases Maurice has, but I can say that there's a lot of debate among economists as to whether monopoly power is actually good for the economy because it supposedly provides an incentive to invest. And that's just not factually correct at all. I think this is sort of a yarn that merging parties often fall back on, that if they're allowed to do whatever it is they want to do, then they'll be able to invest and that will end up benefiting all of us. And in fact, the current debate among economists is why, given how high profits are in the economy, corporate investment is so low. That is the real puzzle to be explained. And I think that certainly is likely to be worsened if concentration and market power gets even more out of hand. Shocking that some corporate claims around getting a merger, something that they want, are not always entirely reliable. Others? OK, back there. Randy. Yeah. Thank you. I'm Randy Barber. I'm actually working with CWA on the Sprint T-Mobile transaction. In follow-up to the question about 5G, I would point out that Sprint has virtually no resources available to put 5G into rural areas. T-Mobile pretty much has them all. If you look at the projections that they have set forth publicly for the amount of 5G that they would have in 2020 on a standalone basis and the amount they would have in 2024, the increase in 5G coverage as measured by population is a couple of percentage points. So there's virtually no difference. Thank you. Any other questions? Was there one back here? OK. The non-compete clauses came up as evidence, but maybe it should be focused on a little more. Seems to me that's an egregious practice. I mean, unless you have intellectual property as to how to make the secret sauce or the Big Mac sauce, if all you are doing is pushing the button to put the sauce on, there really is no rationale for that. So is the movement, the unions, this organization supporting some kind of a legislation to make this a per se violation unless the employer demonstrates that there's a reason for it, or what can we do about it? Thanks. The question is about non-competes and what we can do because it's a flagrant violation. And I think Marshall and then Heidi. Yeah, so in the Congress, it's just coming to an end, a bill was introduced that would have made non-competes. Not a per se violation of the antitrust law, which I think would be a good idea, but a presumptive violation of the law, which is a slightly less good idea, but still a good one. I am looking forward to potentially hopefully seeing that proposal get more legs in the coming Congress. I think I would just go back to what the chairman of the FTC said in testimony last week, which I previously quoted. His view is that non-compete clauses are only potentially violations of the Sherman Act if they occur, if they are done by a firm that has market power and if they are used to prolong that market power. And market power is a very specific set of observables, that is to say, concentration, as Maurice was talking about. Whereas what we know about labor markets is that they're highly monopsonized, that they're small for the purposes of antitrust law. And also that, again, as Maurice was talking about, the imposition of a non-compete clause is itself evidence of market power. It is direct evidence of that. It is better than circumstantial evidence of that. And so one of the ways I hope that we'll see some potential legislative activity in this area is to recognize that the definition of market power needs to be explained. What we have called the indicia of market power needs to be expanded as part of antitrust enforcement in addition to the structural issues that is to say, horizontal concentration. We also have a look at the direct use and imposition of market power as it really exists in the economy. And I think that non-compete's are an obvious place to put that into effect. And I'll just add one quick thing. We're coming out with a paper early next year on the incidence of non-compete agreements, so stay tuned for that. But it's worth pointing out this joke that I make around this office all the time that we should just refer to non-compete agreements as monopsony agreements. Like it really is you are, it's the firm that may not be a single firm in a labor market, but they are making themselves the only option that that worker has by saying you actually can't go get a job with another competitor. Any other questions? I think that pretty much wraps it up. But please join me in thanking this awesome panel, Marshall, Heidi, Vanessa, and Maurice. And stay tuned. This was our second monopsony event in a week, but I predict more coming in 2019. There's nothing happening next week, so don't come back.