Why Are Workers Earning Less? ILO Study Exposes the Hidden Power of Employers Over Wages

An ILO study across ten countries finds that employer wage-setting power disproportionately affects women, young workers, rural populations and agricultural employees, widening wage inequality and limiting job opportunities. The research warns that automation may benefit businesses more than workers unless governments strengthen labour protections, improve job mobility and ensure fairer distribution of productivity gains.

Employers' growing power to influence wages is becoming a major challenge to fair pay, employment opportunities, and economic equality worldwide. A November 2026 study published by the International Labour Organization (ILO), with research contributions from Jorge Dávalos of the Partnership for Economic Policy (PEP), Ekkehard Ernst of the ILO Research Department and economist Diana Torres, reveals that millions of workers may face wage disadvantages because they lack alternative employment opportunities and bargaining power. Titled Monopsonistic Power and Wage Dynamics: Insights from Cross-Country Labour Market Analysis, the research examines ten countries and finds that women, young workers, rural populations and agricultural employees are particularly vulnerable to employer control over wages. It also warns that automation and technological progress may increase business productivity without delivering equivalent financial benefits to employees.

Why Employers Have More Control Over Workers' Wages

The study examines monopsonistic power, a situation in which employers can influence wages because workers cannot easily change jobs or negotiate better employment conditions. Although traditionally associated with markets dominated by a single employer, such power can exist even where numerous businesses operate. Limited job opportunities, geographic restrictions, specialized skills and weak labour protections can prevent workers from finding better-paying positions.

Using labour force surveys from Canada, Chile, Colombia, Indonesia, Italy, Peru, Türkiye, the United Kingdom, the United States and Vietnam, the researchers examine differences in employer power across developed and developing economies. Their analysis considers wages, employment duration, education, age, gender and economic sectors.

Indonesia and Vietnam demonstrate particularly high employer power, reflecting widespread informal employment and limited access to quality jobs. However, developed economies also experience significant wage-setting imbalances, showing that higher national income does not automatically guarantee fair competition for workers.

Women and Young Workers Face Greater Wage Disadvantages

Women generally experience stronger employer control over wages than men because occupational segregation, family responsibilities and restricted mobility reduce their employment alternatives. The study's adjusted international analysis confirms that women face greater employer power even after accounting for differences in education, age and employment sectors.

However, the pattern varies across countries. Türkiye and Vietnam show higher employer power over men in simple comparisons, while gender differences in the United States become statistically insignificant after considering other socioeconomic factors. These findings highlight the importance of addressing structural employment barriers alongside wage discrimination.

Young workers aged 15–24 also face greater disadvantages than middle-aged employees because they have less professional experience, weaker employment networks and fewer opportunities to negotiate salaries. Older workers experience mixed outcomes, although Colombia and Vietnam show greater employer power over employees aged 55–64 compared with those aged 35–44.

Education generally improves workers' bargaining positions by expanding employment opportunities. Nevertheless, highly specialized professionals can sometimes face limited job choices because relatively few employers require their particular qualifications.

Agriculture and Rural Employment Reveal Deep Labour Market Inequalities

Geographic location and economic activity strongly influence workers' bargaining power. Rural employees often have fewer employment alternatives, particularly in agricultural communities where informal work arrangements and limited labour protections remain widespread.

Colombia demonstrates substantial disadvantages for rural workers, while Chile presents a contrasting pattern, potentially reflecting differences in agricultural regulation and economic diversification. Overall, the study's adjusted estimates indicate that urban employment generally reduces exposure to employer wage-setting power.

Agriculture emerges as one of the most vulnerable sectors in Peru, Colombia, Indonesia and Türkiye. Limited bargaining capacity, informal employment and restricted job mobility strengthen employers' influence over wages.

In developed economies, retail, healthcare, education and other service industries also experience significant employer power. Manufacturing and more diversified formal industries generally offer better employment alternatives and lower exposure to wage-setting imbalances.

The research further identifies a relationship between stronger employer power and greater wage inequality. Indonesia combines high employer power with substantial wage disparities, while Vietnam demonstrates how wage regulation can moderate inequality. Canada similarly illustrates how formal employment arrangements and collective bargaining can help protect workers.

Automation Could Deepen Wage Inequality Without Stronger Labour Protections

The study warns that technological advancement does not automatically improve workers' earnings. Examining developments between 2017 and 2022, researchers find that countries experiencing greater increases in employer power generally show weaker wage gains associated with improvements in automation readiness.

Businesses may retain automation's productivity gains rather than share them through higher salaries. This could widen existing income inequalities, particularly where employees lack bargaining power or alternative employment opportunities.

The relationship between employer power and productivity is more complex. Indonesia and Vietnam combine relatively high employer power with lower productivity, while advanced economies maintain stronger productivity despite varying levels of employer influence. This suggests that investment, education, technology and institutional quality also shape economic performance.

The researchers recommend strengthening labour protections, improving education, promoting formal employment and reducing barriers to job mobility. Appropriate minimum wages and collective bargaining can also help address employer power, although their effectiveness depends on local economic conditions.

Ultimately, the study highlights that sustainable economic growth requires more than technological progress and business expansion. Workers must have genuine employment choices, stronger negotiating positions and fair opportunities to benefit from productivity improvements. Without these protections, economic growth risks widening wage inequality rather than improving living standards.