Bread and Roses

This year’s orchestra crisis (there always seems to be one), the will-they-shut-down-or-won’t-they Columbus Symphony, is in a grassroots community fundraising phase, as the board and the musicians wait for someone to blink or possible arbitration. The mayor of Columbus prefers the former:

A spokesman for Columbus Mayor Michael B. Coleman urged the sides to get together quickly but said Coleman would not mediate the dispute.

“The mayor is a fan personally of the symphony, but we have made our position clear: The board and the musicians need to take the next steps,” spokesman Mike Brown said.

Coleman, whose mayoralty has been marked by fiscal discipline, probably doesn’t want to be seen as spending political capital on a dispute within an “elitist” organization. But I’m guessing he isn’t thinking about monopsony power.

Monopsony is the flip side of monopoly—unlike the latter, in which a market is dominated by one seller, in monopsony, a market is dominated by one buyer. “Pure” monopsonies are pretty rare—in economics, the term is usually used in talking about inefficiencies in the labor market.

Classical economics assumes that the labor market operates under pure competition—employers are forced to adopt wage rates set by the market as a whole, aiming for an equilibrium where available work and available workers are in balance. The classical model implies that, as soon as an employer drops wages, even a little bit, all that employer’s workers will bolt, since other employers in the market would presumably respect the prevailing market-rate wage. But that happens so rarely that the idea of monopsony power was invented (by the British post-Keynesian Joan Robinson) to try and come up with a more realistic model of the labor market.

Think about it—if your employer cut your wages by a few cents, you’d probably grumble, but not necessarily leave your job. That’s because there’s other factors keeping you there—location, schedule convenience, the fact that you may enjoy what you do, the fact that switching jobs is an economic risk or hit that it’s just not a good time to take. That whole laundry list, and more besides, adds to the employers’ market power—their ability to offer a wage lower than what pure competition would dictate, yet still fill their available positions.

The classic example of a monopsonistic labor market is Major League Baseball under the reserve clause; the explosion of player salaries following the introduction of free agency is an indication of how artificially depressed those salaries were under the extreme monopsony that previously prevailed. A quick JSTOR search didn’t turn up any studies of it in the literature, but it seems to me that a symphony orchestra is a classic monopsonistic employer: there’s an extremely limited number (often only one) within a given labor market, and the employees—musicians—are liable to put up with an awful lot of crap in order to make any money doing what they love to do. The Columbus musicians, in fact, took a 20 percent pay cut three years ago rather than give up their orchestra jobs. (And reportedly offered to take another 6.5 percent cut to resolve the current impasse.)

The Columbus Symphony situation is particularly intractable because it would seem that the board has done a less-than-stellar job increasing philanthropic revenue, but is trying to make up that deficit with musician salary cuts. (All this at a time when ticket sales are actually up—so much for the Flanagan report.) In fact, the board—proposing both pay cuts and a reduction in personnel—is attempting to exercise classic monopsonistic power, which usually manifests itself in keeping wages and employment rates lower than an unfettered market would produce. (And in an unfairly ultimatumish way—it is not churlish at all to point out that the entire board membership will suffer no economic ill-effects from a shutdown.)

Even fairly libertarian types think that the government should regulate an inefficient market, and I would think that the labor market for orchestral musicians is about as inefficient as they come. One might think that, if the musicians feel their city’s philanthropic capacity has gone untapped, a competing orchestra might find some traction—but keep in mind that the effort and risk in finding the credit or the cash to start up their own ensemble is another way the current organization increases its market value at the workers’ expense. (And also keep in mind that such a move would fundamentally change, or at least add to, the workers’ actual occupations.) This is not to say that forming their own orchestra wouldn’t be a smart or even desirable move, but it is putting more of the onus for the board’s possible mismanagement on the musicians, not the board.

That happens all the time, of course—over the past decade, far too many employees have been left holding the bag for executive misbehavior. (Enron, anyone? WorldCom?) But given the combination of orchestras’ obvious monopsonistic power with their quasi-civic status, some sort of government intervention—even as simple as mediation—would be entirely appropriate in Columbus-type situations. Otherwise, the calculus is so skewed that brinkmanship is almost inevitable; boards have little financial incentive to avoid shutdowns, musicians have little recourse short of a strike. All that dramatic and emotional energy would be better off on-stage.

Update (5/16): The administrative slapstick continues.

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