How uncompetitive markets hurt workers

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.