Employer Consolidation and Wages: Evidence from Hospitals

Wednesday, June 26, 2019: 1:00 PM
Wilson B - Mezzanine Level (Marriott Wardman Park Hotel)

Presenter: Elena Prager

Co-Author: Matthew Schmitt

Discussant: Thomas Koch

To explore the relationship between employer concentration and wages, we examine the effects of a decade of hospital mergers on the wages of hospital workers. To isolate the effects of changes in concentration due to mergers, we estimate difference-in-differences models that compare wage growth in markets with mergers to wage growth in markets without mergers. We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers’ skills are at least somewhat industry-specific. For mergers in this category, we estimate that annual wage growth is 0.9pp slower for skilled non-health professionals and 1.8pp slower for nursing and pharmacy workers than in markets without mergers. In all other cases, we fail to reject zero wage effects. For markets where we detect reduced wage growth, we argue that the observed patterns are unlikely to be fully explained by merger-related changes aside from labor market power. Reduced wage growth appears to be attenuated in markets with strong labor unions, and we do not observe reduced wage growth after out-of-market mergers that leave employer concentration unchanged.