Artificial Intelligence Firms Are Emerging as Potent Monopsonistic Forces, Exerting Influence over Employment Markets
There's been an escalation in antitrust activities. The proposed merger of Albertsons, the second-largest grocery operator in the USA, and number one Kroger was vetoed by the court recently. This could become less common with the departure of Chair Lina Khan, whose term is drawing to a close.
Donald Trump's selection for the next FTC chair, Commissioner Andrew Ferguson, has hinted at examining digital social media platforms for unjust practices or behaviors associated with their opaque, unpredictable user ban and content censorship policies.
Regardless of the new administration's exact moves, it's unlikely to tackle this growing issue more effectively than the Biden White House did – monopsony on a previously unthinkable scale, propelled by artificial intelligence.
Monopsony refers to the consolidation of buying power, akin to monopoly's concentration of selling power.
Monopolistic phenomena are more widely understood, perhaps due to popular games and personal experiences as consumers. A large retail chain enters an area, decreases prices, and makes competition challenging, sometimes forcing smaller businesses out of business. A major national company dominates sales over a vast, comprehensive area. The merging of corporations – with the large growing even larger by absorbing smaller companies – leads to just a few companies controlling various markets.
Monopsony can be equally harmful. When there are few buyers, sellers compete for business, frequently on a price basis due to the monopsonist's preference for low costs.
The employment sector also suffers when it comes to monopsony. Monopsonists pressure wages to gain a price advantage. Although huge corporations with numerous employees can impact wages in specific areas, they lack the capacity to control employment levels.
Artificial Intelligence (AI) vendors now present a modern monopsonistic threat. They create technology capable of replacing numerous people across numerous job types and industries. In 2015, Matt Beane, a graduate student at MIT then, told me, “I don't think we have a handle on [automation replacing even white-collar workers]. The endgame scenarios seem quite severe. From this point on, it’s really, really, really going to change and it’s going to change faster than we can keep up.”
His prediction has proven correct. AI research began in the 1950s, and various types have become common and useful. The advent of generative AI – like advanced language models that can often provide near-human conversation or text, or programs that can create images and videos within seconds – has transformed the industry's potential.
Call center agents, writers, photographers, videographers, human language translators, artists, designers, lawyers, secretaries, and many others are at risk of being replaced. While not all in a single profession, enough to leave many disoriented. Pew Research recently proposed that 19% of Americans are in jobs highly exposed to AI, and 23% of workers are in jobs least exposed. These figures will undoubtedly increase.
Ignoring the frequent argument for technology advocates that vanishing old jobs will create new ones, it's crucial to acknowledge that new opportunities will be insufficient to offset lost ones. Companies invest heavily in automation if it does not lead to a significant decrease in the employment count. Moreover, there won't be enough revenue sources to offset the losses because the notion of a utopian future where every individual benefits from technology's benefits is a fallacy.
Prominent AI pioneers seem to envision a future where machines control the world due to hyper-effective technology, arguing that only they can prevent a real-life combination of The Terminator.
While not focused on a futuristic scenario, the real danger lies in the present, and businesses aiming to maximize profits are the potential culprits.
- The increasing use of generative AI in various industries has raised concerns about inequality, as it could lead to a monopsony in the labor market, where a few AI vendors have the power to replace numerous workers across different job types.
- The antitrust activities against monopolistic practices in traditional industries like grocery retailing should also be extended to AI vendors, as they pose a modern monopsonistic threat that could exacerbate existing economic inequalities.
- As the employment sector is already suffering from the effects of monopsony due to the consolidation of buying power in corporations, the integration of artificial intelligence could further worsen job losses in certain sectors, leading to increased unemployment and income inequality.
