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Executive Summary

The lack of competition can increase prices for goods and services, such as cellphone plans, airline fares and banking fees. However, often overlooked is how lack of competition can affect labour markets and wages. When employers do not have to compete with each other for workers, they may suppress wages.

However, little has been done to investigate competition issues in Canada’s labour markets. Given more than half of Canada's gross domestic product (GDP) is driven by workers, the lack of attention to labour market competition means the Competition Act has not been enforced for more than half the country’s economy. And while more research is now being conducted on competition issues in labour markets, much of it is for the American context.

This report is one of the first studies examining the degree of labour market concentration across Canada. Labour market concentration occurs when a small number of firms in a local labour market employ a large number of workers of a specific type.

To measure the degree of concentration, the Hirshman Herfindahl Index (HHI) was calculated for all labour markets in Canada using job posting data from Lightcast, a provider of labour market data. Concentration for more than 800 different labour markets from 2018 to 2023 was examined.

Key insights from the report:

1. Concentration is not exclusively a rural issue. Generally, the smaller the labour market the more concentrated it will be. But concentration is not only a rural issue. The data show there are significant concentration issues in some small and mid-sized cities in Canada.
2. High levels of concentration are common in certain health and social-sector jobs. The specific occupations that stand out are in healthcare, post-secondary education and social services. Not surprisingly, many of the employers for these jobs are provincial governments or other public sector organizations. However, we also find that non-profit organizations are prominent employers in some concentrated labour markets, particularly for jobs in the social sector.
3. Concentration in labour markets may mirror concentration in product markets. The study found high levels of concentration in some retail and business administration occupations. The employers that dominate those occupations are prominent firms in Canada’s banking and retail markets (particularly grocery). These results suggest that the same market concentration that plagues consumers can also impact workers.
4. Placement agencies may play a role in creating labour market concentration. The study’s analysis of occupations in business, finance and administration highlighted the national prominence of staffing agencies in some occupations related to these fields.

The report outlined three recommendations:

1. Boost the Competition Bureau’s ability to enforce the Competition Act in labour markets. This recommendation has three pillars:
   1. Develop merger enforcement guidelines that specify how the Bureau plans to enforce the Competition Act when evaluating a merger that impacts a labour market.
   2. Hire experts with deep knowledge of Canadian labour markets to build internal capacity and knowledge.
   3. Increase the Bureau’s budget to support enforcement of the Competition Act in labour markets, which represent more than half of Canada’s economy.
2. Labour unions should consider the impact of labour market monopsony when negotiating collective agreements in public sector jobs in healthcare, education and social services. In these occupations, the government is the largest employer – and often the only employer. Unions should consider how this monopsony may reduce wages and negotiate compensation with consideration to this effect.
3. The Bureau should coordinate with provincial and municipal governments to monitor regional labour markets. Many labour markets are small, with few employers, and these smaller labour markets are more likely to be concentrated. The Bureau does not have the capacity to monitor every regional market across Canada. However, by working together with municipalities and provincial governments, the Bureau could develop a monitoring system that gives a clearer line of sight into mergers, acquisitions and other business activities that raise competition concerns.