On the occasion of an OECD hearing on competition and labour markets, TUAC brought the attention of competition authorities to the employment effects of increased corporate market power. In the attached submission, TUAC made concrete recommendations to enhance protection against labour market monopsonies.
The key messages are as follows:
- In a situation of labour market monopsony, an employer is able to unilaterally lower wage levels and downgrade standards on working conditions without losing its workforce. This can occur either because of the dominant position of the firm, or because of various frictions in the labour market that prevent workers from switching to better paying employers.
- A common situation to all types of labour market monopsonies is where employers’ power is not counterbalanced by sufficient bargaining power on the side of the workers. This power imbalance is exacerbated in the context of the digital economy. Online platforms are strong monopsonists, able to impose poor working conditions whilst workers often lose labour law protection and face competition law restrictions to set their own labour price.
- Such unbalanced labour relations contribute to wage stagnation and artificially low levels of employment. This harms the economy, the consumer and ultimately social welfare.
- Traditional competition tests, with their one dimensional focus on consumer price, are not adapted to deal with labour market monopsonies in general and especially in the light of the increasing digitalisation of the economy.
- Negative impacts of labour market concentration are mitigated where there is strong trade union presence and collective bargaining.
- Wider policy discussions are warranted, in particular in relation to trade and industrial policies.
- Considering the above, the OECD could launch research to better understand the drivers for industry and labour market concentration.
Read the full submission in the attached pdf file