Competition policy normally focuses on the dangers of big companies exploiting consumers. Thus, the Competition and Markets Authority (CMA) announced last week that it was investigating a proposed Vodafone and Three merger. The firms say this will boost investment; opponents say creating the UK’s largest mobile operator will reduce competition and push up bills. The CMA must decide.
But there’s pressure to broaden competition policy: to make it about protecting workers as well as consumers. After all, if we have little choice about who to work for, the chances of us coming off badly are pretty high. Firms can have what economists call monopsony over workers, just as they can have monopoly over customers. Lower wages, rather than higher prices, are the result.
So last week the CMA also published its first study into “competition and market power”. The headline finding is that working in areas where there are fewer firms competing for your services (most likely to be outside the south-east of England) is costly, knocking up to 10% off wages relative to the most competitive local labour markets. Plus, firms make it more difficult for workers to defect to competitors, with a quarter of workers affected by non-compete agreements.
Three cheers, then, for the CMA, but the responsibility for acting on these findings lies elsewhere. The recognition that employers have power in the labour market shows us why we need a minimum wage (and why it hasn’t cost jobs). It’s also why we’ve seen workers in Sports Direct warehouses exploited. And why social care workers may accept less than the minimum wage: a female-dominated workforce with a strong vocation and needing flexible, local work has few alternatives.
So rather than a regulator that blocks mergers, our response should be a government with a good work strategy.
