IDEAS home Printed from https://ideas.repec.org/a/ozl/journl/v26y2023i1p1-21.html
   My bibliography  Save this article

How uncompetitive markets hurt workers

Author

Listed:
  • Andrew Leigh

    (Department of Competition, Charities and Treasury)

Abstract

From 2012 to 2022, average full-time wages grew by just 1 per cent in real terms. One possible contributing factor to slow wage growth is the combination of growing employer power and shrinking employee power. In 2022, the unionisation rate fell to 12 per cent, the lowest level since Federation. Work by Jonathan Hambur (2023) suggests that many Australian labour markets are concentrated, particularly in regional areas. Since the mid-2000s, the negative impact of concentration on wages has more than doubled. Monopsony power is also closely connected with firm entry. In areas with fewer new firms, people are less likely to switch jobs. Two contractual features that may entrench monopsony power are non-compete clauses that restrict employees from immediately switching to a competing employer; and no-poach clauses that restrain franchisees from hiring workers at competing outlets. By restricting labour market mobility, non-compete clauses and no-poach clauses may increase monopsony power.

Suggested Citation

  • Andrew Leigh, 2023. "How uncompetitive markets hurt workers," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 26(1), pages 1-21.
    • Handle: RePEc:ozl:journl:v:26:y:2023:i:1:p:1-21
    as

    Download full text from publisher

    File URL: https://ajle.org/index.php/ajle_home/article/view/159
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Orley Ashenfelter & David Card & Henry Farber & Michael R. Ransom, 2022. "Monopsony in the Labor Market: New Empirical Results and New Public Policies," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 1-10.
    2. Joshua Gans & Andrew Leigh & Martin Schmalz & Adam Triggs, 2019. "Inequality and market concentration, when shareholding is more skewed than consumption," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(3), pages 550-563.
    3. Alan B. Krueger & Orley Ashenfelter, 2022. "Theory and Evidence on Employer Collusion in the Franchise Sector," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 324-348.
    4. Boris Hirsch & Elke J. Jahn & Alan Manning & Michael Oberfichtner, 2022. "The Urban Wage Premium in Imperfect Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 111-136.
    5. Evan P. Starr & J.J. Prescott & Norman D. Bishara, 2021. "Noncompete Agreements in the US Labor Force," Journal of Law and Economics, University of Chicago Press, vol. 64(1), pages 53-84.
    6. Jonathan Hambur, 2023. "Did Labour Market Concentration Lower Wages Growth Pre-COVID?," RBA Research Discussion Papers rdp2023-02, Reserve Bank of Australia.
    7. Efraim Benmelech & Nittai K. Bergman & Hyunseob Kim, 2022. "Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 200-250.
    8. James Bishop & Iris Chan, 2019. "Is Declining Union Membership Contributing to Low Wages Growth?," RBA Annual Conference Papers acp2019-06, Reserve Bank of Australia.
    9. Evan Starr & J J Prescott & Norman Bishara, 2020. "The Behavioral Effects of (Unenforceable) Contracts† [“Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools]," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 36(3), pages 633-687.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Callaci, Brian & Gibson, Matthew & Pinto, Sergio & Steinbaum, Marshall & Walsh, Matt, 2023. "The Effect of Franchise No-Poaching Restrictions on Worker Earnings," IZA Discussion Papers 16330, Institute of Labor Economics (IZA).
    2. Michael Lipsitz & Evan Starr, 2022. "Low-Wage Workers and the Enforceability of Noncompete Agreements," Management Science, INFORMS, vol. 68(1), pages 143-170, January.
    3. Steven Berry & Martin Gaynor & Fiona Scott Morton, 2019. "Do Increasing Markups Matter? Lessons from Empirical Industrial Organization," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 44-68, Summer.
    4. Roger Blair & Perihan Saygin, 2021. "Uncertainty and the marginal revenue product–wage gap," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 564-569, April.
    5. Steven C. Salop & Fiona Scott Morton, 2021. "The 2010 HMGs Ten Years Later: Where Do We Go From Here?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 81-101, February.
    6. Hoey, Sam & Peeters, Thomas & Principe, Francesco, 2021. "The transfer system in European football: A pro-competitive no-poaching agreement?," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    7. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.
    8. Deschamps, Pierre & De Sousa, José, 2021. "Labor mobility and racial discrimination," European Economic Review, Elsevier, vol. 135(C).
    9. Mazumder, Soumyajit & Yan, Alan, 2020. "What Do Americans Want From (Private) Government? Experimental Evidence Demonstrates that Americans Want Workplace Democracy," SocArXiv j9asz, Center for Open Science.
    10. Alan Manning, 2021. "Monopsony in Labor Markets: A Review," ILR Review, Cornell University, ILR School, vol. 74(1), pages 3-26, January.
    11. Devicienti, Francesco & Grinza, Elena & Manello, Alessandro & Vannoni, Davide, 2022. "Employer Cooperation, Productivity, and Wages: New Evidence from Inter-Firm Formal Network Agreements," IZA Discussion Papers 15617, Institute of Labor Economics (IZA).
    12. David N. F. Bell & David G. Blanchflower, 2021. "Underemployment in the United States and Europe," ILR Review, Cornell University, ILR School, vol. 74(1), pages 56-94, January.
    13. repec:hal:spmain:info:hdl:2441/6ftmcu468j8a49bft2hrpi6uql is not listed on IDEAS
    14. Anna Sokolova & Todd Sorensen, 2021. "Monopsony in Labor Markets: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 74(1), pages 27-55, January.
    15. Jonathan Hambur, 2023. "Did Labour Market Concentration Lower Wages Growth Pre-COVID?," RBA Research Discussion Papers rdp2023-02, Reserve Bank of Australia.
    16. Korpi, Martin & Halvarsson, Daniel, 2023. "City Size, Employer Concentration, and Wage Income Inequality," Ratio Working Papers 363, The Ratio Institute.
    17. Langella, Monica & Manning, Alan Patrick, 2021. "The measure of monopsony," LSE Research Online Documents on Economics 113925, London School of Economics and Political Science, LSE Library.
    18. Akin A. Cilekoglu, 2023. ""Labor Market Monopsony and Firm Behavior: Evidence from Spanish Exporters"," IREA Working Papers 202307, University of Barcelona, Research Institute of Applied Economics, revised Jul 2023.
    19. Vitor Costa, 2023. "Local Labor Market Effects of Mergers and Acquisitions in Developing Countries: Evidence from Brazil," Papers 2306.08797, arXiv.org.
    20. Gibson, Matthew, 2021. "Employer Market Power in Silicon Valley," IZA Discussion Papers 14843, Institute of Labor Economics (IZA).
    21. Chau, Nancy H. & Kanbur, Ravi & Soundararajan, Vidhya, 2022. "Employer Power and Employment in Developing Countries," IZA Discussion Papers 15514, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    monopsony power; unionisation; non-compete clauses; no-poach clauses;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ozl:journl:v:26:y:2023:i:1:p:1-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sandie Rawnsley (email available below). General contact details of provider: https://edirc.repec.org/data/becurau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.