The paper challenges the present rhetoric used by competition policy makers and enforcers when advancing economic efficiency based on the assumption that promoting efficiency will help inefficient market players to leave the market. However, an exit of larger or smaller businesses is always associated with their downsizing or restructuring and, as a result, with job losses. The dogmatic application of competition policy serving economic calculus, rather than the social order, disregards the negative impact of competition on wages and employment. Revisiting the classical price and wage efficiency theoretic assumptions, the paper challenges the use of the efficiency benchmark at micro- (industrial organization) and macroeconomic levels. The case study of mergers & acquisitions (M&A) across several sectors of the economy will be used to demonstrate how internal growth and merger-specific efficiencies (some of which include the elimination of labour costs) impact wage efficiency and employment. While 6.5% of 3.7 million jobs losses as a result of M&A activity during a five year period does not seem to create a major macroeconomic imbalance, a closer look at recent M&A trends during 2013-2016 demonstrates that, indeed, jobs losses far outweigh the balance of job creation. Finally, the paper seeks to challenge the assumption that ‘new jobs replace old jobs’ following a successful merger. This is at odds with the fact that the majority of EU mergers are approved, even if subject to conditions, leaving an insignificant percentage of mergers blocked since 1990 (24 or 0.3%).
Chirita, A. D. (2016, October). Impact of Economic Efficiency on Employment: A Case Study of Mergers and Acquisitions. Paper presented at 82nd International Atlantic Economic Society Conference., Washington, DC, USA