The argument for a minimum wage is that labor demand is inelastic -- employers will hire the same number of workers. They will just absorb the higher wages or pass along the costs to customers. Workers get all the benefit. If labor demand is elastic, employers cut back on the number of employees.Of course, labor economists would recognize that John Cochrane’s entire post assumes a perfectly competitive labor market. One has to wonder about economists who have never even considered monopsony power.
Monday, November 4, 2019
Has Tyler Cowen or John Cochrane Ever Heard of Monopsony Power?
I’m going to replicate one portion of a long winded rant about alleged cognitive dissonance: