Is Amazon a Monopsony?

Amazon is worth a trillion dollars. In recent news, Amazon pushed their wage rate up to $15/hour for its employees. This was implemented after unions demanded better conditions. It was reported that Whole Foods employees were laid off. A worker expressed that many experienced "job consolidations, reduced labor budgets, poor wage growth, and constantly being asked to do more with fewer resources and now with less compensation".  Some employees were living off food stamps. Union members and protestors claimed managers create a hostile work environment that prevents workers from seeking proper medical treatment, taking bathroom breaks, or reporting safety issues.

So how was Amazon able to travel thus far while laying people off? A monopsony is when there is only one buyer of a particular type of labor.  Amazon dominates the online market. Amazon comprises roughly 50% of total U.S. e-commerce. As large as Amazon is, Amazon knows that they’re not competing for workers. This is what paved the way to the thought that they can pay less than they would if they were in a competitive market.

This monopsony affects neighboring companies involved as well as shipping companies. Due to its enormous size, Amazon is able to demand steep discounts from companies like UPS and FedEx, as they are simply not in a position to refuse the business. They cannot afford to refuse the biggest buyer on the market.

Amazon has become a large part of many lives in recent years. Amazon has begun to push out smaller companies by offering its sub-units. Amazon released Kindle which seeks to compete in the world of e-books and other tablets. Aside from Amazon Prime's usual e-market where buyers and sellers are able to interact at fast shipping rates, Prime has expanded immensely to other industries. Prime Music entered the music streaming industry-- competing with Apple Music and Spotify. Prime also offers movie and TV series rentals. In addition, Whole Foods was bought by Amazon-- a well-known grocery market chain. Overall, the presence of Amazon is growing at an alarming rate.



Sources:
https://www.theguardian.com/technology/2019/jan/01/amazon-fulfillment-center-warehouse-employees-union-new-york-minnesota
https://www.gurufocus.com/news/856040/amazon-monopoly-in-the-21st-century-part-2
https://www.thedailybeast.com/amazon-is-worth-dollar1-trillion-its-workers-are-on-food-stamps
https://www.marketplace.org/2018/10/02/economy/examples-monopsony-amazon-wages

Comments

  1. AustinApril 19, 2019 at 2:02 PM

    Just as Google have their debate over them being a monopoly, I think it is important to question when do a company gets too large and needs regulation. Behemoths such as Google and Amazon have domination over the market and they have displayed varies tactics to keep it that way. They have the ability to keep our competition through their market control and their connection with producers, suppliers and every component that makes up the industry.

    ReplyDelete
  2. AnonymousApril 19, 2019 at 9:10 PM

    It's interesting how Amazon only recently increased its wages to better meet demands of worker unions. I think this represents the biggest problem with monopsonies: the absence of wage growth. Without the union there to back the workers, monopsonies have no incentive to meet any worker demands, and that means no wage growth. I believe this makes monopsonies most harmful in countries that lack strong labor unions, as there is nothing to protect workers from this type of behavior, and the workers cannot simply move to a different, better paying job because there is none available. I think that in the near future, companies may face increased regulation in countries with strong unions like the US, and move their detrimental practices to countries where they are still able to continue.

    Source: https://www.ineteconomics.org/perspectives/blog/why-we-should-worry-about-monopsony

    ReplyDelete

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