Market power and wages in Russian local labor markets

Abstract

The paper investigates the relationship between market power of employers and level of employees’ wages in local labor markets in Russia. The study is based on the modern concept of local labor markets, which assumes that the latter have not only geographical (spatial), but also sectoral (professional) boundaries. Using data from the web portal of Rostrud “Rabota Rossii” (Jobs of Russia) about 13.2 million vacancies posted in the period 2018Q1—2022Q3, for the first time in Russian practice concentration indicators were calculated for 30 thousand local labor markets in Russia, determined by a pair of properties “settlement— profession”. It is shown that 20% of local labor markets of mass professions in Russia are characterized by at least a temporary state of monopsony. Using the methods of economic-mathematical (econometric) modeling, it is demonstrated that the growth of the market power of employers is statistically significantly associated with a decrease in the wages of workers in mass professions. According to the estimates obtained, when moving from the 25th to the 75th percentile of the distribution of market power, the level of nominal wages offered to employees in local labor markets, other things being equal, decreases by 6.3—8.4%. The result is robust to the use of alternative approaches to defining the boundaries of local labor markets in Russia.