Mergers and acquisitions reshape not only the product markets that firms operate in, but also the labor markets where firms compete for workers. When two firms that compete for labor merge, labor market concentration can increase substantially. This raises an important and increasingly policy-relevant question: do mergers create value by improving labor efficiency, or by increasing employers’ power over workers?

The issue has become central to modern antitrust debates. The 2023 Merger Guidelines issued by the Department of Justice and the Federal Trade Commission explicitly recognize labor market effects as a key dimension of merger review. Policymakers and scholars have increasingly expressed concern that mergers may create monopsony power in labor markets, allowing firms to suppress wages or reduce employment opportunities for workers. At the same time, mergers may generate legitimate labor efficiency gains through workforce integration. (more…)