Women is interviewed for a job
The report aims to contribute to a broader understanding of the labour market. Bigstock

The Competition and Markets Authority's (CMA) Microeconomics Unit has released a report offering an in-depth analysis of the UK labour market.

This research, the first major study from the unit established in 2022, aims to contribute essential insights into the dynamics of competition, employer market power, and their impact on workers.

According to a government press release, the report seeks not only to guide the CMA's work but also to influence government policies in fostering a more transparent and equitable labour market.

During the presentation of the findings at Durham University, CMA Chief Executive Sarah Cardell stressed upon the importance of well-functioning labour markets as a key driver of economic growth. The report, a collaborative effort between the CMA and the academic and policymaking community, is expected to play a crucial role in shaping economic policies.

A significant revelation from the report is the stability of labour market concentration in the UK over the past two decades, the release stated. The ratio between the number of workers and employers has shown minor fluctuations, indicating a consistent level of market concentration.

This contrasts with the United States, where research suggests a growing trend in labour market power. Moreover, the report explores regional and sectoral variations in concentration, with implications for wage differentials.

According to government data, the number of job openings in the UK decreased by 49,000 in the period from October to December 2023, reaching a total of 934,000. This marks the 18th consecutive quarter in which vacancies have declined, setting a new record for the longest continuous decline in job openings.

Despite this, the current number of vacancies remains higher than pre-COVID-19 pandemic levels. In November 2023, there were 69,000 working days lost due to labour disputes throughout the UK. This represents the lowest number of working days lost since May 2022. The majority of labour disputes in November 2023 occurred in the transportation, storage, information and communication industries.

Notably, labour markets outside London and the Southeast exhibit higher concentration, impacting workers in those areas. Blue-collar professions, including care workers and tradespeople, have seen a decline in concentration, while white-collar workers, such as managerial staff and IT professionals, have experienced stability. The economic consequences are tangible, with wages on average 10 per cent lower in the most concentrated markets compared to the least.

The report delves into the relationship between income share and worker contribution across the UK economy. It revealed a slight increase in the share of income received by workers, accounting for around two-thirds of their contribution to revenues.

However, in sectors with significant labour market power, the report suggests that workers receive less than the full value of their contribution to revenue, aligning with broader academic research on the subject.

A notable concern highlighted in the report is the prevalence of 'non-compete' clauses in employment contracts, affecting approximately 30 per cent of UK workers. In sectors like ICT and professional and scientific services, this figure rises to over 40 per cent.

The surprising ubiquity of non-compete clauses across various sectors, including retail, education and food services, raises questions about their necessity and impact on labour market dynamics.

The report sheds light on the significant increase in jobs offering remote and hybrid working arrangements since the onset of the pandemic. Currently stabilising at around 20 per cent of UK roles, hybrid jobs are more prevalent in areas with lower market concentration, such as London.

This shift in working arrangements is associated with a rise in wages and has the potential to alter the employer-employee power dynamic, offering a broader range of job opportunities for workers, the government release mentioned.

CMA Chief Executive Sarah Cardell, in her comments on the report, highlighted its contribution to the evidence supporting well-functioning labour markets as crucial for economic growth. She accentuated the report's role in informing academic and policymaking communities at a time when economic stimulation and improved well-being are key priorities.

She predicted that the findings are to guide ongoing efforts by the CMA to combat anti-competitive conduct in labour markets, ultimately fostering a more transparent and equitable working environment for all.

She said: "It will provide helpful insights to inform thinking across the academic and policymaking community, at a time when we are all seeking ways to stimulate our economy and make people better off.

"The CMA will also use the findings to inform our own work to combat anti-competitive conduct in labour markets, including our ongoing investigations into suspected anti-competitive agreements between employers."