> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces.
> Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower.
A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job.
That's why minimum wage laws and workers rights are important. Companies will always push for lower wages wherever they can, without a care for the actual wealth created by the worker. The only way to counter that push is by giving more power to the worker, and in low-skilled fields with lots of available workers, you need to do that through regulations and subsidies.
> Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower.
A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job.
That's why minimum wage laws and workers rights are important. Companies will always push for lower wages wherever they can, without a care for the actual wealth created by the worker. The only way to counter that push is by giving more power to the worker, and in low-skilled fields with lots of available workers, you need to do that through regulations and subsidies.