When only a few firms dominate hiring in a labor market, are workers typically worse off?

People’s ability to negotiate for better wages depends, in part, on competition for workers among firms. Workers are put in a weak negotiation position and wages are lower than would otherwise be the case when there are a small number of companies in a particular location. Firms with outsized labor market power may also coerce employees to sign non-compete agreements, which tend to limit entrepreneurship, information flow and worker mobility. Companies’ negotiating strength vis-à-vis workers is lower in cities and varies both regionally in the U.S. as well as by occupation. However, more than half of all U.S. labor markets tend to be ones where companies are highly concentrated, giving companies strong bargaining power.