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Alas, oligopolists don’t think like that. Because they divide up a market between themselves, they are oblivious to many of the economic forces that cause the rest of us to do the things we do. Sure, there’s some “competition” at the margins, which causes the occasional price war to erupt. But the main goal is preservation of the status quo.
Wages are sticky, in part, because they almost never come down, even during recessions, so employers have an incentive to avoid raising them when times are good.
But that theory assumes a competitive labour market. Collective agreements put upward pressure on wages, but so does churn, which is the word economists use to describe job shifting. Workers tend not to go through the trouble of changing employers in return for less pay. Last year, with the jobless rate at a level consistent with full employment, the Bank of Canada observed that the churn rate had gone up. It was no coincidence that hourly wages were rising at an annual pace of about four per cent, the fastest in years.