With massive US companies becoming a significant part of the economy, more Americans are choosing to purchase goods and services from these giants. This pattern is evident on both a national and local level, as research from Chicago Booth shows that in any given county in the US, consumers are increasingly directing their spending towards a handful of businesses.
However, when it comes to employment, the situation is different. While jobs have become more concentrated in these large companies nationwide, the number of workers they typically hire in a single location has decreased. This could mean that job seekers may face increased competition on the ground. Yet, the researchers emphasize that the situation is nuanced and not entirely straightforward.
Industrial concentration
Over the past century, a notable trend has emerged: the top 1 percent of companies in the US, based on assets, now command 90 percent of the economy, up from 70 percent in the 1930s. Similarly, the top 0.1 percent of companies have seen their asset share rise to 88 percent, up from 47 percent. A shift from manufacturing to services between 1992 and 2017 has been a significant factor in this change, with a reallocation of jobs rather than sales playing a key role.
To understand the impact on sales and employment, the researchers examined Economic Census data from 1992 to 2017, focusing on six sectors: finance, manufacturing, retail, services, utilities and transportation, and wholesale trade.
The shift from a highly concentrated manufacturing sector to a less concentrated services sector contributed to an overall decrease in employment concentration. Larger factories operated with fewer employees, while service jobs, such as those in independent hair salons, increased.
Structural change
This structural transformation involved a move from lower productivity, labor-intensive work to higher productivity, skills-based work. The US manufacturing sector lost 7–8 percent of total economy-wide sales and 10 percent of total employment to the services sector between 1992 and 2017. Without this shift, local employment concentration would have risen by 9 percent instead of falling by 5 percent.
On the sales side, the researchers suggest that the growing national concentration may lead to weaker competition for various products, with larger chains offering a greater variety of goods at lower prices, reducing options from local stores.
The study refrains from proposing specific policy interventions for consumers or workers, highlighting the need for policymakers to understand the labor market’s complexities. While potential benefits may exist for younger workers who can adapt to new skills and industries, there are also clear costs, particularly for those facing challenges in changing jobs.
“One prominent example would be workers employed in—or displaced from—manufacturing jobs,” the authors conclude. “Evidence indicates that such workers fare poorly.”
