Commentary
Perhaps the most sophisticated argument in favor of the minimum wage law is the one based on monopsony (a single buyer of labor in this case) or oligopsony (very few potential employers). It is a counter to this riposte: If the minimum wage law is so great, if it really boosts wages to the level stipulated by legislative enactment, why be so chintzy and demand to raise it, only, to something like $12 or $15 per hour; why not boost it to, oh, $1 million per hour. Then we would all be rich.
Based on monopsonistic or oligopsonistic considerations, this attempt at a reductio ad absurdum can be rejected out of hand. However, the very concept of monopsony or oligopsony is problematic from a theoretical level; it implies interpersonal comparisons of utility, a real big no-no in economics.
But mainstream economists would disagree with me on this; they are big fans of this monopsony theory. Even they, however, for the most part, agree that—to the extent it exists at all—it pertains, only, to high wage employees, not people whose productivity is anywhere near the minimum wage level. Why is that? That’s because a monopsony (really, we’re never talking monopsony, one buyer; we’re talking oligopsony, a few buyers) means that only one firm can hire you! But dishwashers, floor sweepers, clerks, people who ask if you “want fries with that?” can work for, potentially, literally, hundreds of thousands of employers, not just one or a few. Neither monopsony nor oligopsony can...
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