Nathan Wilmers. Wage Stagnation and Buyer Power: How Buyer-Supplier Relations Affect U.S. Workers’ Wages, 1978-2014

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Wage Stagnation and Buyer Power: How Buyer-Supplier Relations Affect U.S. Workers’ Wages, 1978-2014

Since the 1970s, corporate restructuring has shifted more and more workers into workplaces substantially reliant on outside corporate buyers.  During the same period, wages for U.S. workers have stagnated.  Standard theories of wage determination allow bargaining power to affect wages within companies, but assume that competitive pricing allocates resources between different companies.  I extend organizational theories of wage determination to between-organization interactions and I predict that powerful buyers can demand decreases in suppliers’ wages.  Panel data on publicly traded companies shows that dependence on large buyers decreases suppliers’ wages and accounts for 10% of the decline in wage growth in nonfinancial firms since the 1970s.  Instrumental variables analysis of mergers among buyers confirms that wage decreases result from strengthened buyer power.  These findings document how networked production grew in tandem with consolidation among large buyers.  The spread of unequal bargaining relations between corporate buyers and their suppliers slowed wage growth for workers.

Nathan Wilmers is a PhD candidate in Harvard Sociology, researching wage and earnings inequality, economic sociology and the sociology of labor.  In his dissertation, he studies how shifting relations between companies affect wage inequality. Rising earnings inequality since the 1970s has come mostly from growing wage differences between different companies, not between co-workers. Drawing on economic sociology, he provides new evidence on the distributional effects of supply chain restructuring, rising product market concentration and skill segregation across firms. This research appears in the American Journal of Sociology and Social Forces and is supported by the National Science Foundation's Doctoral Dissertation Improvement Grant and the Washington Center for Equitable Growth.