
The Conservative Case for a Higher Minimum Wage - gruseom
http://www.unz.com/article/the-conservative-case-for-a-higher-minimum-wage
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IvyMike
In some ways, the minimum wage is an anti-union measure.

Because in the alternate universe where there is no minimum wage, the people
who work at McDonalds do not get paid $5 an hour. They belong to a union.

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ergoproxy
In a _competitive_ labor market, raising the minimum wage results in lower
employment, lower output and higher prices.

But we just saw "How Silicon Valley CEOs conspired to drive down tech engineer
wages," so we know we don't have a competitive labor market. See
[https://news.ycombinator.com/item?id=7111531](https://news.ycombinator.com/item?id=7111531)

In a _monopsonistic_ labor market, raising the minimum wage results in greater
employment, greater output, and lower prices. It results in greater employment
because the monopsonist faces and upward sloping supply curve for labor, and
uses his market power to keep wages artificially low, beneath the equilibrium
wage. If the wage is exogenously raised, the quantity of labor supplied
_increases_. (If you don't believe me, you should draw supply and demand
curves, and prove it to yourself.)

 _In reality_ , when NJ raised its minimum wage in 1992, what happened was (1)
employment increased, and (2) prices increased. _This observation_ fits
neither the competitive nor the monopsonist model! These observations were
made by David Card and Andrew Krueger.

A resolution for the "Card-Krueger Paradox" was developed by A. Ross Shepherd,
Professor Emeritus of the University of Missouri--Kansas City and Published in
the _Southern Economic Journal_ on Oct 1, 2000. There's a copy online here
(but it lacks the figures):
[http://www.thefreelibrary.com/Minimum+Wages+and+the+Card--
Kr...](http://www.thefreelibrary.com/Minimum+Wages+and+the+Card--
Krueger+Paradox.-a066582730)

His solution boils down to realizing we have an impure monopsonistic market in
which the higher minimum wage increases the firm's Long Run Average Cost. So
employment goes up, but so do prices.

