Labour market monopsony/oligopsony in the UK: Putting labour law to work

Neoclassical economics holds that although labour markets will be marred by monopsony/oligopsony when they are not perfectly competitive, the likelihood of such a state of affairs is vanishingly small. However, recent research is mounting a formidable challenge to this assumption: data shows that labour markets in many parts of the UK landmass and economy are indeed monopsonistic/oligopsonistic. One explanation is that labour markets incorporate frictions that impede labour mobility and costless job exits/quits. The outcome is threefold: wage stagnation, with workers remunerated below the competitive wage rate; heightened inequality; and overinflated prices paid by consumers.
This article probes labour law’s role in generating, addressing and chilling monopsony/oligopsony and its adverse effects; the claim is made that since labour laws contribute towards the embedding of monopsony/oligopsony, their reform is part of the solution. Proposals are then presented for legislation adjusting labour laws governing particular clauses found in employment contracts.