To really fix affordability, look to the labour market

Much of the focus on the federal government’s recent fall economic statement was on affordability – how to make living in Canada easier through supports for affordable housing and rules to help struggling mortgage holders were among the headline items.

It also included strong promises to modernize competition law, aimed at helping consumers who are increasingly feeling the squeeze of rising costs. Notably, it promised to crack down on abusive practices by dominant businesses, update our merger laws and strengthen “right to repair” laws.

These changes are needed, and welcome, but what was missing were more targeted and specific reforms to Canada’s competition law that intentionally support workers and create a more inclusive economy. The statement alluded to “improving the focus on worker impacts in competition analysis”. But more specific reforms are needed.

Previously, in the 2022 Budget Implementation Act there were changes to the Competition Act that made it a criminal offense for employers to collude to fix wages or conspire to not hire each other’s employees. This egregious gap in our legislation came to public awareness at the outset of the pandemic with the “hero pay” scandal where several grocery chains communicated their intentions to cancel hero pay bonuses for their workers.

This gap has now been filled, but both the government and the Competition Bureau have yet to fully realize the potential of competition law to support workers and create a more equitable economy.

Traditionally, competition problems in labour markets have been overlooked by law enforcement and lawmakers. In Canada, there is no evidence that the Competition Bureau has ever investigated let alone considered anticompetitive business behaviours that hurt competition in labour markets, which can lead to lower compensation for workers and fewer employment opportunities.

But this indifference to workers is starting to shift, and there is a growing body of research that points to the need for more action to address competition issues in labour markets. For example, a recent OECD report that measures concentration, one indicator of competition, in labour markets across OECD countries found that about 14 percent of workers in Canada are employed in highly concentrated labour markets, second only to Estonia where 15 percent are in highly concentrated markets.

Improving competition in labour markets is critical for fostering an inclusive economy where people have opportunities to create economic success. In contrast to other policy strategies for improving wages, like increasing the minimum wage, improving competition in labour markets brings the double-benefit of boosting wages and other types of compensation while also increasing the number of jobs that are available. Fundamentally, it’s about making labour markets work better.

Using competition law to improve labour markets could also bring the added benefit of reducing government expenditures on redistribution programs like the Canada Child Benefit, the GST Rebate. Since these programs are geared to a person’s income, the more workers make the less they draw from these programs.

Reforms to the Competition Act are needed that explicitly require the Competition Bureau to consider workers and labour markets when reviewing mergers and acquisitions. Lawmakers should also consider making new, labour-specific provisions that are analogous to the abuse of dominance laws we have today. In the same way that business should be prohibited from abusing their dominance to the detriment of consumers, they should also not be allowed to abuse their dominance to suppress wages and undermine employment opportunities.

Because competition law creators and enforcers have historically ignored labour markets, they have also overlooked certain public and private sector policies and practices that undermine competition in these markets. Some with a more libertarian bent may point to the minimum wage, employment equity laws, laws permitting unionization, and other policies that create more equity and fairness as “anticompetitive”. However, what they overlook is the role of discrimination and systemic barriers in undermining competition in labour markets.

As part of PPF’s project All in: Pathways to Economic and Financial Inclusion in Canada, I and my colleagues are unpacking systemic barriers – policies, practices or procedures that prevent some individuals from fully participating in the economy and financial systems. These barriers are a core cause of economic and financial exclusion, creating substantial, negative consequences for the Canadian economy. The people often most disadvantaged by these barriers include women, racialized people, youth, people who identify as LGBTQ2S+, Indigenous persons and people with disabilities.

Systemic barriers and discrimination drive inefficiency in labour markets by preventing the most qualified people from taking on roles that make best use of their talents. When used to deny workers from accessing opportunities, systemic barriers and discrimination could be thought of as anticompetitive practices that ice strong workers out of workplaces where they could otherwise provide a competitive spark within workplaces and elevate the performance of teams. Theoretical work has also suggested that employers may use discrimination as a strategy for suppressing wages, exerting their anticompetitive dominance across an entire labour market.

Internationally, the Competition Bureau has been a leader in the space of competition and equity, supporting the development of the OECD Gender Inclusive Competition Toolkit with international partners. These initiatives are important, but without seriously considering labour markets and the role of discrimination and systemic barriers in them, efforts to promote economic inclusion through competition law can only go so far.

To create a more inclusive economy, we need to go deeper and examine labour market structures and employer practices that hold people back from realizing their full potential. Doing this will allow people to achieve their full potential, find economic and financial inclusion, and enhance the collective prosperity of Canada.