Monopsony exploitation finds its place where either one buyer with large number of sellers exists or one seller with large number of buyers exists. Such situation also exist in labour market where there is only one employer and thousands of people are looking for getting employed and this gives him some power to exploit workers. He can exploit by hiring workers at lower wages as workers cannot resist taking up the job as they don’t have any other option.
In modern economy, monopsony exploitation can take many forms.
Government may act as a monopsony exploiter as it is the only one under which policemen, fire workers exists. Since it cannot use its wage fixing power, so can dominate only to some extent. Monopsony exploitation in labour market exists through varying situations.
If a worker faces the problem of commuting to a large distance to work, he may be induced to leave that job despite having a higher wage. So the employer might exploit this weak point of the worker. Similarly, worker’s inability to work unlimited number of hours could be an advantage for the employer to exploit him.
Unemployment, too, could be a reason for the monopsony exploitation. If higher unemployment persists in an economy, workers are not able to get their desired jobs and many of them are unemployed, then in such situation, employer respond by fixing a lower wage to the workers.