Competition Issues in Labour Markets

A recent fall in the labour share of income has helped fuel rising inequality and populist demand for dramatic reform of competition law. While these pushes cannot find an immediate response in competition law enforcement, they have stirred a debate within the competition community on monopsony and labour market power retained by employers, and on when exercise of employer monopsony power infringes competition law.

In June 2019, the OECD held a hearing aimed at discussing the anticompetitive concerns in labour markets. The discussion focussed on the factors contributing to the creation of monopsony power and its effects on workers and consumers. It explored why cases involving monopsony power have been relatively rare, and what use competition authorities could make of their enforcement powers to prevent the creation of monopsony power, for example through mergers or no-poaching agreements, and the abuse of that power. 

The topic was also explored the year after during the 2020 Competition Open Day held on 26 February 2020 at the OECD Centre in Paris. 

All related materials for the discussion are available on this page.

• Monopsony power is analogous to monopoly power in that it creates economic inefficiency and a reduction in the firm’s output. While monopoly leads to higher prices or lower quality, monopsony in labour markets typically leads to lower wages or worse working conditions for workers and, when associated with market power in the product market, also higher prices for consumers.  
• Recent studies conducted in some OECD countries suggest that there may be high level of concentrations in certain labour markets and, where these are present, wages are typically lower. 
• Employers may infringe competition law in a number of ways.
• In addition to anticompetitive conduct or transactions, a number of other factors may contribute to creating and facilitating the exercise of monopsony power held by employers in some labour markets. Some of these can be addressed by competition authorities’ advocacy powers. 
• Competition enforcement in labour markets has been limited so far since competition authorities face some challenges.

Executive summary with key findings • Points clefs de la discussion

Detailed summary of the discussion • Compte rendu détaillé

OECD Background note  •  Note de référence de l'OCDE

Competition Policy for Labour Markets by Herbert Hovenkamp

Monopsony and the Business Model of Gig Economy Platforms by Marshall Steinbaum 

Market Concentration 2018

Does competition kill or create jobs? 2015