Monopolistic firms pay higher wages than competitive firms, according to J. W. Garbarino and J. K. Galbraith. Some writers believe that monopolistic firms balance the interests of employees, consumers, suppliers, and stockholders rather than maximize profits, a belief which suggests that they are generous employers rather than competitive firms who must strive for high profits. A few economists, in the taxonomic tradition, have suggested the possibility of high wages under monopoly, without expressing any opinion on the matter. The usual belief that monopolists take from the poor and give to the rich thus may be wrong. A finding that monopolists pay high wages also would imply that, for them, profit maximization takes second place to goals associated with public responsibility.
In the main stream of neo-classical theory is the opposite view that wages are low under monopoly. The exposition by Mrs. Joan Robinson assumes an upward-sloping supply curve of labour not only to each industry but also to each firm. Labour economists in recent years have followed Mrs. Robinson in stressing the prevalence of monopsony. It may be shown that product monopolists are likely to have more monopsony power than competitive firms, so, according to neo-classical theory, monopolists transfer income from the poor to the rich through low wages as well as through high prices.
I propose to test the proposition that monopoly raises wages and the opposite—that it lowers them—by comparing average annual earnings in Canadian monopolistic industries with those in matched United States industries which are competitive, or less monopolistic. The theories together with the evidence on which they are based will be presented first.