Dive Brief:

• Industry consolidation is putting a squeeze on suppliers competing for contracts with large companies, which in turn has negative effects on the suppliers' employees, panelists said at an event hosted by the left-leaning Economic Policy Institute (EPI) and Open Markets Institute in Washington, D.C., Wednesday. 
• An EPI report presented at the event described an erosion of worker power, caused by policy changes such as deregulation and growth of an independent contractor model.
• Panelists called for a reinstatement of worker collaboration, including unionization and bargaining rights, to restore the balance of power between employers and employees. 

Next up, @lydiadepillis moderates a discussion on market concentration and labor markets with @hshierholz @SanjuktaMPaul and @sandeepvaheesan. Watch live: https://t.co/uAHJHgE2gp @openmarkets pic.twitter.com/ZEIbgrBzwL

— Economic Policy Institute (@EconomicPolicy) December 12, 2018

Dive Insight:

Unemployment in the U.S. remains around its lowest levels in decades, and supply chain-related industries continue to see growth. Manufacturing added 27,000 jobs in November, and transportation and warehousing employment grew by 25,000, according to the Bureau of Labor Statistics. 

These figures may seem to indicate the power is in the hands of the workers, but panelists painted a different picture.

Federal Trade Commissioner Rohit Chopra said once workers accept a new job, the new employer gains power through employee contracts that could include anything from noncompete clauses to mobility-restricting visas. Contract terms can be "illegal and unfair on their face," Chopra said.

Some employers choose to go a different route and use independent contractors for particular job functions. The status offers flexibility to workers, and employers are not required to pay for benefits or time off, saving costs. In some instances, the model has led to issues such as worker misclassification. 

"Worker misclassification is a trend in our economy that we need to deploy a number of tools to fix," Chopra said. He said regulators should play a role in banning unfair clauses in unemployment contracts. 

"Most workers are not movie stars or NFL players who have an agent who is going to negotiate for them on a level playing field"

— Open Markets (@openmarkets) December 12, 2018

Suppliers' employees may be particularly vulnerable to labor issues as the companies, especially small businesses, look to compete in industries that continue to consolidate.

In the home improvement industry, for example, the three largest firms — Home Depot, Lowe's and Menards — held 47% of market share in 2002, according to the Open Markets Institute. Last year, that figure was up to 87%. 

Vendors to these big-box retailers must keep their prices and costs low to stay competitive, and that in turn has an effect on their employees' wages and power, said Sandeep Vaheesan, legal director at the Open Markets Institute. 

"If you look at a supply chain like Walmart, you see hyper-concentration at the retail level and then almost atomistic competition upstream," Vaheesan said. 

AmeriGas and Blue Rhino, suppliers of propane tanks, agreed to reduce the amount of propane in their tanks without reducing the price and coordinated their negotiations with Walmart. The decision, as Vaheesan described it, was a move to stay competitive in a consolidated market. The FTC, however, filed a complaint against the suppliers for price fixing. 

"This is a case where the FTC was doing Walmart's bidding against two much smaller companies that were trying to even out the playing field," Vaheesan said.