On 25 January 2024, the Microeconomics Unit[1] of the Competition and Markets Authority (CMA) published a report examining competition and market power in UK labour markets (the Report).  The Report is the Unit’s first published work, covering developments in the labour markets over the last two decades.  Over this period, labour markets have changed significantly through the rise of flexible working and the gig economy (defined as labour services contracted through digital platforms), changes in restrictive covenants (contract clauses that restrict what workers can do after they leave their current employer), and shifts in pay-setting policies.  Each of these factors has the potential to impact employer market power.[2]

Increased Regulatory Focus on Labour Markets

In a recent speech, CMA Chief Executive, Sarah Cardell, observed that where labour markets work well, workers find employment easily and contribute to the economy; conversely, an imbalance of market power can lead to lower wages and lower productivity.   Imbalances of this type have wide ramifications, arguably demonstrated by ongoing industrial disputes in the UK with junior doctors and train drivers, and the recent high profile cases brought in relation to worker treatment in the gig economy, notably concerning Uber drivers and Deliveroo riders.  

The CMA recently confirmed its intention to tackle concerns in the labour market in its 2024/25 Annual Plan, published new guidance for employers on competition law, and opened investigations into anti-competitive conduct in relation to freelance and employed workers in the production, creation and/or broadcasting of both sports and non-sports television content (subsequently closing the former investigation).  It has also extended an investigation into the fragrances and fragrance ingredients markets to cover suspected anticompetitive arrangements relating to the hiring or recruitment of staff.

The CMA is not alone in focusing on labour markets.  National competition authorities in the EU, including in France and Poland, have launched labour-related antitrust investigations, and the US Department of Justice recently blocked a proposed acquisition by Penguin Random House partly due to concerns over reduced compensation for authors.

There has been increased legislative and judicial scrutiny of employment terms, notably in relation to non-compete clauses and restrictive covenants: following consultation, the British government plans to table legislation limiting the duration of non-compete clauses in employment contracts to three months.  The US Federal Trade Commission is considering an outright ban of such clauses.  Meanwhile, the EU Court of Justice recently confirmed that non-compete clauses in employment contracts can be classified as one of the most serious “by object” infringements of competition law.  The CMA Report also examines the impact of non-compete clauses.

Findings of the Report[3]

The principal findings of the Report are as follows.

  • Employer market power in the UK.  Overall employer market power and labour market concentration in the UK have not increased over the last two decades; they remained constant, or declined, from 1998 to 2023.  This contrasts heavily with the US, where aggregate employer market power has increased.  Employer market power and labour market concentration vary heavily by region, according to skill and income levels, and by sector.
  • Employer market power and labour market outcomes. The 10% most concentrated labour markets feature wages that are, on average, 10% lower than comparable wages in the least concentrated 10% of labour markets.  Where collective bargaining agreements protect workers, however, this differential does not exist.  Consistent with monopsony theories of labour markets, which assume that firms in concentrated labour markets reduce labour use in order to decrease wages, workers in more concentrated labour markets tend to work fewer hours.
  • Non-competes and other restrictions. Approximately 15% of firms use restrictive covenants, with non-competes being the most prevalent, alongside non-disclosure and non-solicitation clauses. Around 26% of workers believe they are subject to non-compete clauses: most commonly, these are workers in information and communication technology and professional services industries, although non-competes are present across all occupations, industries and levels of income.  Significantly, nearly a quarter of employees subject to non-compete agreements believe that this made it harder for them to leave their current employer to join a competitor.
  • Gig economy.  Although the gig economy has increased in importance, it accounts for only 5% of total employment.  Gig economy workers commonly have several sources of income, and 8% of these workers earn at or below the minimum wage (compared with 5% in the “traditional” economy).
  • Hybrid working.  Around one fifth of job postings offer remote and hybrid work, and workers consider hybrid work to be worth 5-10% of their wages.  The CMA found no clear evidence that labour-market concentration affected the availability of hybrid working, except where workers were paid very low wages (being the segment with the highest proportion of gig economy workers).
  • Performance-related pay.  Performance-related pay (as opposed to standardised pay) is generally associated with higher wages, and more unequal wages within a firm.  This wage inequality between performance-related pay and standardised pay is less prevalent in firms with union representation.


The CMA Report seeks to shine a spotlight on issues in labour markets that, it believes, could impact the competitiveness of the economy as a whole.  Competition law enforcement, however, is likely to provide only part of the solution.  Sarah Cardell commented that non-compete clauses are generally outside the scope of competition law, and therefore not within the CMA’s remit.  As noted above, the government is already planning to intervene in this area through legislation.  It is nevertheless clear that arrangements between firms involving sharing of information about employees or employee benefits, as well as agreements between companies not to poach employees, are likely to come under increasing scrutiny from the CMA and other competition agencies.

[1]              The Microeconomics Unit launched in 2022 with the goal of conducting research relevant both to the CMA itself and wider policy interest.

[2]              Report, paras. 2.1 and 2.4.

[3]              Report, paras. 1.11, 2.2, 2.3, 2.5, 2.6, 2.7.