Price Determination in a Hampered Market

Economics Economics Questions
1

I’ve read that in a market with artificial barriers to entry, businesses are in an empowered position enabling them to negotiate artificially low wages thus keeping the residual.

Is this true? It seems to me that in the absence of explicit collusion, each business is still willing to bid away labor from its competitors up to their respective MRPs. So it seems to me that even in a hampered market, Austrian wage determination theory should still apply.

What does seem correct is to say that since total productive output in a hampered economy is smaller, labor productivity is artificially reduced and thus wages are lower. So it would seem that while wage earners are certainly harmed by barriers to entry, it wouldn’t seem that it’s because firms can sustainably pay monopsonistic wage rates.

Anyone?

2

i’d say you’re right in that it is a problem that emerges “in aggregate” rather than being the actions of any one business that bring it about. that is the problem with all government intervention. it robs the individual of the ability to impact things.

the absurdity rears its head when labor reacts to this by creating artificial barriers to entry in a profession. this reduces supply of employees and drives wages up.

neither would exist in a free market.