Employer Concentration and Labor Force Participation

Abstract

This paper examines the association between employer concentration and labor outcomes (labor force participation and employment).  It uses restricted data from the U.S. Census Bureau’s Longitudinal Business Database to estimate, at the county level, to what extent more concentrated labor markets have lower labor force participation rates and lower employment.  The analysis also examines whether unionization rates and education levels mediate these associations.

The paper found that:

• Labor force participation is strongly negatively correlated with employer concentration.
• Employment is weakly negatively associated with employer concentration.
• The relationship between concentration and labor outcomes is weaker where union coverage is higher, while education does not play a major role in moderating these associations.

The policy implications of the findings are:

• Places where labor markets are concentrated might have a greater prevalence of low eligibility for Social Security benefits due to lower participation rates.
• Antitrust policy applied to the labor market might improve future Social Security benefits for individuals in concentrated labor markets.