Awesomelyglorious wrote:
As markets go, hiring markets are probably relatively competitive. There are more suppliers than demanders, but there are a lot of people demanding things, except for the most narrow niches. Even further, the claim that firms will go hire MORE people because production prices increase doesn't make a lot of sense from a position of the composition of components of production. Any basic notion of capital-labor substitution will hold that if labor is cheaper, it will be more used instead of substituted for capital.
As market oddities go, the oligopsony power really isn't most plausibly the largest issue.
I am not at all sure that this is the case, and particularly if we restrict our view to the segment of the labour market where a minimum wage would be the general, contractual wage. Minimum wage work is unskilled, or minimally skilled, consequently it is easily replaced. To the extent that unskilled labour is closer to a commodity than to a differentiated good or service, straightforward price pressures have a greater effect.
I do not see the minimum wage having a significant impact on employment levels. For most employers, I suggest, the number of employees is not dictated by the size of the wage bill, but rather by two other factors: statutory externalities, and production requirements.
For example, if I run a convenience store that is open 24/7, then I likely require 336 person hours of labour, reflecting the workplace safety rule that no worker can work alone. It doesn't matter whether the minimum wage is $8.25 or $10.75, the law requires me to have two employees in the store at all times.
Similarly, if I am running a small factory, and I need to produce 1,000 dozen units for orders due to ship in the next 30 days, then, based on the systems in my factor, I can figure out how many hours the factory needs to run, and therefore how many person-hours of productivity I need. It doesn't matter whether the minimum wage is $8.25 or $10.75, I need the same number of workers to produce those 1,000 dozen units.
But if the minimum wage was only $8.25, would I hire more workers? Why would I do that? I would only do that if the extra workers, beyond the number required, would produce more value than the cost of their employment. Is my convenience store turning away customers because of long lineups? Then maybe extra workers make sense, because they will create extra sales during peak hours. But it's the demand from customers, not the marginal wage difference that is going to tip that equation.
Ultimately, the cost of minimum wage is passed on to the consumer. And this is where, of course, it properly belongs.
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--James