Monopsony Power in the AI Labor Market

Monopsony power is the labor-market counterpart to monopoly: a condition in which one or few employers dominate the demand side of a labor market, allowing them to set wages below what a competitive market would produce. Classical monopsony was associated with single-employer towns; modern monopsony, as documented by economists including Alan Manning, Suresh Naidu, and José Azar, arises from labor-market concentration, non-compete clauses, occupational licensing, and worker mobility frictions. AI platforms add a new dimension: by creating two-sided markets that intermediate between workers and end-clients (Uber, DoorDash, Upwork, and emerging AI-augmented work platforms), they aggregate monopsony power at unprecedented scale. The productivity gains of AI accrue disproportionately to platform owners rather than to the workers whose labor the platforms coordinate, producing a widening gap between productivity and pay that Autor identifies as a central policy concern.