A note on minimum wages and monopsony power

Source: Cafe Hayek
by Don Boudreaux

“The existence of monopsony power supplies the only theoretically credible condition under which a minimum wage can possibly improve the well-being of low-skilled workers without harming any of them. Of course, however, claims that monopsony power is in reality rampant enough in the United States to justify minimum-wage legislation are incredible. These claims fail the smell test. But — and here’s the point of this post — to the extent that temporal or geographic pockets monopsony power might arise in reality, once source of such power might well be minimum-wage legislation itself.” (12/06/17)