Brian Callaci: Reining in UPMC’s monopsony power key to addressing workforce crisis in Pittsburgh hospitals

What do self-proclaimed freelance writer Stephen King and UPMC registered nurse Jodi Faltin have in common? They’re both fighting back against corporate monopsony power that eliminates competition in the labor market and allows employers to dictate terms to workers.

Whether you’re selling horror stories or expertise in providing patient care, when an employer holds outsized dominance in a labor market you lose pay and the power to negotiate in a fair and open market.

Now, in a major shift in antitrust enforcement, the Department of Justice is not only looking to protect consumers, but to protect workers too. And it is starting to bear fruit: If last week’s district court decision to halt the merger of Penguin Random House and Simon and Schuster is any indication, other employers who have amassed monopsony power, like UPMC, have reason to worry. And millions of workers have reason to celebrate.

Less well-known and understood, but increasingly on the mind of anti-trust regulators is the impact of monopsony power on the labor market. Monopsony power is the other side of monopoly power. Instead of (or in UPMC’s case, in addition to) controlling the supply side of the health care market, UPMC controls the demand side of a labor market, and that control is helping to drive the workforce crisis in Pittsburgh hospitals.

As I testified in an intergovernmental hearing on UPMC’s unchecked power in Pittsburgh’s labor market, it is now widely accepted by economists that employers have the unilateral ability to influence wages — something that is not news to anyone who has had a job. Wages are not set by the impersonal forces of supply and demand, but in large part by the discretion of employers. When labor markets are highly concentrated with few employers, this power to set wages is supercharged. Like US Steel before it, UPMC’s role as the largest employer in the region gives it an outsized power to control hiring, set wages and exploit workers.

Health care workers are particularly vulnerable to monopsony power because many health care workers can only work in hospital settings. With UPMC hiring so many different types of specialized workers, it has an outsized impact on multiple job markets. This unchecked power drives down wages, benefits and job quality for every person in the region who works for a paycheck.

While thousands of workers have used the historically tight labor market of the past year to upgrade to better jobs, this opportunity is foreclosed to workers in markets dominated by single employers. As UPMC continues its march to consolidate the health care industry across Pennsylvania, working people in Pennsylvania are less free to change jobs to improve their financial and working lives. UPMC currently employs 92,000 people including a staggering 75% of all hospital workers in Pittsburgh.

High job market concentration like this comes with lower wages and lower job quality. Moving from the 25th to the 75th percentile in concentration is associated with wage reductions of 5% to 17%. It’s not just wages either: labor market concentration is associated with increased violations of labor rights. In hospital markets in particular, takeovers are associated with lower staffing ratios, resulting in nurses being responsible for more beds and patients.

We know this is true at UPMC because the people who work there told us so in a survey of Pittsburgh hospital workers. A shocking 93% of Pittsburgh hospital workers surveyed are thinking of leaving the profession altogether, citing chronic short-staffing as the No. 1 reason why, followed closely by emotional and mental demands of the work, poor pay, unsustainable workloads and the inability to consistently provide high-quality patient care.

Because UPMC controls 3 out of every 4 hospital jobs in Pittsburgh, hospital workers have limited choices. They can accept UPMC’s conditions, compete for a limited number of non-UPMC jobs or leave the region — something that too many hospital workers, particularly nurses, have done over the last few years. UPMC workers have reported being fired or quitting after speaking up about chronic short staffing issues and then being “blackballed” from working for UPMC. Being unable or unwilling to work at UPMC pushes good hospital workers out of an industry that is already struggling with a drastic labor shortage.

While the new commitment of the federal government to use antitrust regulation is laudable and much needed, court cases and rulemaking take time. Underpaid and overtaxed frontline hospital workers — and their patients — need relief now. As with US Steel two generations ago, increasing and protecting workers’ bargaining power through industry-wide unionization and through antitrust enforcement to level the playing field between hospital workers and employers would provide the immediate relief workers at UPMC need to make it through their shifts, and see a future for themselves in Pittsburgh’s hospitals.

Brian Callaci is chief economist at the Open Markets Institute, a Washington, D.C., think tank focused on antimonopoly policy.