Geneva, Mar 31: A global study by the International Labour Organization has found that concentration of hiring power among a few firms is contributing to rising wage inequality, particularly in developing economies.
The report, based on data from over 40 countries between 2006 and 2022 and supported by inputs from the World Bank, highlights that labour market concentration reduces workers’ bargaining power, leading to suppressed wages and fewer employment opportunities.
According to the study, labour market concentration occurs when a small number of companies employ a large share of workers within a sector or region, limiting job mobility and giving employers greater control over wage-setting.
The findings show a strong link between such concentration and widening income gaps, with inequality largely driven by gains at the top of the income distribution.
High-skilled workers and executives tend to benefit disproportionately, while wages for lower-income workers stagnate.
“This trend reflects not only slower wage growth for the majority but also faster income gains among top earners,” the report noted.
The impact is more pronounced in developing countries, where labour protections are often weaker, union coverage is limited and informal employment is widespread.
In such conditions, workers have less capacity to negotiate better pay and working conditions, the study said.
In contrast, developed economies with stronger labour institutions are better able to mitigate the adverse effects of employer dominance, even in sectors where large firms prevail.
The report emphasises the role of trade unions, collective bargaining mechanisms and minimum wage policies in reducing inequality.
These measures help strengthen workers’ negotiating power and provide a safety net for low-income earners.
“Labour institutions play a critical role in balancing power between employers and workers,” it added.
The study calls for policymakers to address labour market concentration alongside traditional economic indicators, stressing that employment quality, wage fairness and worker protections are key to inclusive growth.
It also underlines the need for policies that promote fair competition and safeguard workers’ rights, as economies undergo rapid changes driven by technology and globalisation.
The findings highlight that tackling employer dominance in hiring will be essential to reducing inequality and ensuring more equitable economic outcomes worldwide.
