why do people think that increasing the minimum wage would increase employment?

[filc]

@Leviathan

As noted, monopsony power (and more broadly, oligopsonistic conditions in labor markets) complicates matters

The Monopsony theory concept is entirely impossible to be realized on any type of market. Even a coerced market will very unlikely ever experience such a condition.

@Leviathan

and claiming that minimum wages increase unemployment is not so cut and dry

It is indeed very cut and dry. If we raise the minimum wage to $1000 an hour, who would be able to employ people at the rate?

It’s important to note that labor is nothing more than a market good like anything else. If we price fix banana’s at $1000 per pound, banana’s would also go un-employed. The folly is when people try to pretend that labor mythically behaves differently on a market. Though the fundamentals are the same and can be proven a priori.

@Leviathan

This is actually consistent with basic labor economics

There is only economics. There is no such thing as labor economics. This fallacy assumes we can arbitrarily define different behaviors amongst various market goods. Changing key terms, definitions, and looking for instances of empirical data to support the arguments that were fabricated. The whole thing is folly though and changing key terms and definitions is something you have demonstrably been subscribed to.

@Leviathan

So all in all, we actually have rather substantial empirical evidence of the minimum wage’s benefits for employment, human capital acquisition, productivity, which constitute efficiency improvements or aids to such.

I have substantial empirical evidence which shows that flipping a coin will land heads 68% of the time.

Again, why don’t we raise minimum wage to $50 an hour? $1000 an hour?

@Leviathan

negative employment effects in a monopsony model,

A monopoly in providing employment for labor is necessary for such a model. It’s nearly an impossibility without some form of coercive entity. Even with a coercive entity such a condition is extremely difficult to create and maintain.

@Leviathan

What’s usually asserted is not a well-informed claim, as there is a substantial amount of empirical research that demonstrates the precise opposite to be true. For direct relevance here, consider Addison et al.'s Do minimum wages raise employment? Evidence from the U.S. retail-trade sector:

And as I said, we do things here A priori. Not A posteriori.

There are those who also have proven that selling ice-cream in NYC during the summer time is linked to an increase in homicide rates.

Measuring complex social phenomena is always arbitrary. I could pull the same amount of statistics which would counter yours. Emperical evidence is inherently flawed. Thats why we do it A prior. [:)]

You have to prove, a priori, that minimum wage benefits workers. To that I ask you, why not raise minimum wage to $1000?

@Leviathan

There have been attempts at Austrian criticism of the monopsony model of the labor market, such as Walter Block’s An Austrian Critique of Neo-Classical Monopsony Theory. As with so much of his work, there seems to be little but an attempt to attack a strawman, with this one being a case of a criticism of more dated static monopsony models rather than the more contemporary concept of “dynamic monopsony” explored by Card and Krueger, Burdett and Mortensen, or by Alan Manning in his Monopsony in Motion. The same is true of Don Bellante’s The Non-Sequitur in the Revival of Monopsony Theory, which contains little more than his disgruntlement at the usage of the term “monopsony” to describe conditions of upward sloping labor supply curves as opposed to traditional single-buyer conditions, is a repetition of previous criticism he’s offered of the “old” model, with copy-and-paste of commentary from more insightful criticism of Peter Kuhn (which itself claims that the model is “not sufficiently precisely defined for empirical testing” and therefore does not address the studies among the numerous ones mentioned above).

No, the whole model is mythic. I doubt Dr. Block desires to waste much of his energy and time into nonsensical ideological arguments. He’d prefer to stay in the realm of reality and economics.

@Leviathan

It seems standard ignorance of the difference between textbook theory and reality. It’s parallel to the fact that many are happy to chant that price floors cause surpluses and price ceilings cause shortages without considering the fact that the existence of numerous equilibrium prices above and below the respective floors and ceilings set will mean that there is no disruption.

Yes your first statement is very true. many economics believe that equilibrium is a thing of reality in the market. It is not, Mises explains this simply in HA. Also, any attempt at identifying an equilibrium price is pretty outrageous. Likewise the establishment of the “Correct” minimum wage is also always arbitrary.

It’s entirely true and can be proven a priori that price fixing a good always results in shortages and surplus’s. Raising a rate too high results in a surplus, a rate too low results in shortage. The same applies to labor.

@Leviathan

There have certainly been attempts to offer “rebuttals” of Card and Krueger’s work (alongside mere declarations of its falsity, such as that offered by James Buchanan), but has that “disproved” the model as a whole?

Yes. Primarily because the monopsony concept is flawed just like the monopoly concept is flawed. The boundaries which identifies a monopsony is arbitrary, just as monopolies boundaries are arbitrary. What usually happens is a specific industry begins to loose consumer interest. The industry however previously may have been very popular and lucrative. The labor economist only sees one thing, he see’s the wages of horse and buggy repairmen steadily falling. There is a bunch of left over capital for horse and buggy salesmen. Few people have horse and buggies left. All these firms attempt to please this small pool of people. As a result prices need to drop as competition is stiff. The less profitably industry likewise has to pay their laborers less.

Instead of taking this as a signal for laborers that they need to leave the industry they argue that it is monopsony and create a union to force wages higher. A free market economist by contrast however see’s that Horse and Buggy is loosing capital investment and interest. However they also notice that the automobile industry is starting to grow, by contrast the wages are rising in that industry where as they fall in horse and buggy.

SO the labor economist isolates his periferal view and focus’s only on the men loosing their wages in the horse in buggy industry. Instead of being a pal and telling his buddies to find new employment in a more desirable industry he uses violence, or threat of violence, to keep the wages high and punish the existing capitalists in that industry.

So it comes back to Hazlitt’s lesson. Observing what is unseen. In all cases monopsony models are assigned arbitrarily and ignore factors that go on in other parts of the economy. If wages are dwindling in an industry it’s more than likely a signal that laborers need to leave a dieing industry and participate in an industry where consumers have high demand and have needs that need to be addressed.

This is in effect the entire fallacy of the Organized labor model.

[filc]

http://search.mises.org/search?q=monopsony&site=Literature

For your referencing apatite.