"You look down the squad list and the quality is unbelievable," Milner told the club's website.
"You see the bench and some boys have been injured, some players aren't in the squad, and the young boys who are knocking around the squad with such quality.
"You need that competition for places to drive each other on. Hopefully we can keep improving as a team."
The five-times European champions are fourth on the table on 13 points after six games, having also beaten Arsenal, Chelsea and champions Leicester City and drawn with Tottenham Hotspur while their only defeat has come against the promoted Burnley.
"If you don't perform, the shirt is going to be taken off you and someone else is going to get the chance," Milner added as his team prepare for a clash with Swansea on Saturday.
"And you don't know how long they are going to have that shirt for."
(Reporting by Ian Rodricks in Bengaluru; Editing by Greg Stutchbury)
