Apr 26 2008
∞
“ Yet, even when it is sub-optimal, a minimum wage higher than the market rate raises the level of employment anyway. This is a highly remarkable result, because it only follows under monopsony. Indeed, under competitive conditions any minimum wage higher than the market rate would actually reduce employment, according to classical economic models. Thus, spotting the effects on employment of newly introduced minimum wage regulations is among the indirect ways economists use to pin down monopsony power in selected labor markets.
