One way things might become more competitive is when more people become freelancers. The freelance market is more volatile than the rigidly regulated traditional labor markets allowing for larger pay increases during good times (and also decreases during bad times), in general, it approaches a more realistic compensation of real added value.
Personally I've greatly benefited from becoming a freelancer in Europe and have never been one day unemployed since I started over 7 years ago (4 different customers in total). The significantly higher income (almost 3 times my old, already decently above average, _net_ income) royally compensates the lack of unemployment benefits or reduced pensions.
I feel that if more devs would become freelancers it would create real upward pressure towards compensation because compensation isn't entrenched in company policies and regulations.
One downside is the proliferation of those in-between rent-seeking businesses, they're probably needed to get started initially but they take huge cuts and have a lot of absurd contract requirements so it's wise to develop an active strategy to find jobs without them.
I think what the OP had in mind and what is actually common in Europe is "contracting". It's basically a full-time position, but you're brought in as an independent company (mostly to circumvent labor laws and sometimes tax laws as well) and not an employee. It's all basically a widespread scam to work around dysfunctional laws. BTW job sites in UK even the the "permanent employee/contractor" toggle for searching through full-time positions.
Start by defining your rate. Find out how much you cost to your current employer (including any additional costs and taxes your employment incurs which you never get to see), add at least 10% for shifting risk towards yourself (e.g. when you get ill the employer doesn't need to pay, cheap to fire you, etc.). Try to read up on some taxation basics and try to understand what your net income would be.
Don't worry about not being good enough for freelancing, there's a market for juniors as well, it's all reflected in the rate.
Start looking for contracts: e.g. just search for "reactjs contract london". You'll find some stuff, but keep in mind most contracts never even get published as the recruiters also have people on call. See how the rates align with what you have in mind, note which skills you know are in high demand, make a list of companies that are involved, contact their recruiters through linkedin by sending your CV and rate, say you're a starting contractor so you need a bit of time to set things up. They will understand, everybody has to start. Things move pretty quickly in that world, once you have a contract, contact an accountant and set up your business and off you go.
You might want to be a bit more flexible (e.g. in terms of location) in the beginning just so you can get started. Once you're up and running, things move by themselves. Keep in mind you'll probably be poor during the first year because you have to upfront taxes and things like that.
Don't let them push your rate down too much, rates are negotiable but keep in mind the customer will probably be paying an already agreed upon rate and you're just giving the recruiters more rent for doing nothing.
If you become a tax hacker you can _really_ optimize your income, don't expect accountants to do an exceptional job for you. Tax systems aren't that different from a quirky legacy code base you can hack around in. Talking to people who are also interested in that might help as well, some people are real tax nerds.
Personally I've greatly benefited from becoming a freelancer in Europe and have never been one day unemployed since I started over 7 years ago (4 different customers in total). The significantly higher income (almost 3 times my old, already decently above average, _net_ income) royally compensates the lack of unemployment benefits or reduced pensions.
I feel that if more devs would become freelancers it would create real upward pressure towards compensation because compensation isn't entrenched in company policies and regulations.
One downside is the proliferation of those in-between rent-seeking businesses, they're probably needed to get started initially but they take huge cuts and have a lot of absurd contract requirements so it's wise to develop an active strategy to find jobs without them.