This hypothetical is more an analysis on the constraints (monopoly employer, closed system, static labor supply / demand, static prices) than on the effect of the minimum wage on consumption. It ignores that the minimum wage harms both employers and employees that would be hired absent a minimum wage.
A minimum wage will be inefficient in all situations relative to a taxing more inelastic economic activity and redistributing the proceeds.
Given a monopsony employer, setting a minimum wage equal to the competitive equilibrium wage is efficient because it removes the monopsony dead weight loss.
The monopsony approach to the labor market says they’re the rule. A company doesn’t actually formally have to be the only buyer of labor power in its region to hold monopsony power.
This hypothetical is more an analysis on the constraints (monopoly employer, closed system, static labor supply / demand, static prices) than on the effect of the minimum wage on consumption. It ignores that the minimum wage harms both employers and employees that would be hired absent a minimum wage.
A minimum wage will be inefficient in all situations relative to a taxing more inelastic economic activity and redistributing the proceeds.
Given a monopsony employer, setting a minimum wage equal to the competitive equilibrium wage is efficient because it removes the monopsony dead weight loss.
Agreed! Thanks, that is certainly the caveat I would add. In real world, monopsonies are however rare to nonexistent
The monopsony approach to the labor market says they’re the rule. A company doesn’t actually formally have to be the only buyer of labor power in its region to hold monopsony power.