<story><title>What harm do minimum wages do?</title><url>https://www.economist.com/schools-brief/2020/08/15/what-harm-do-minimum-wages-do</url></story><parent_chain><item><author>throwaway894345</author><text>&amp;gt; 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&amp;#x27;t usually live too much without finding a job.&lt;p&gt;I&amp;#x27;m generally in favor of stronger job protections and so on, but I&amp;#x27;m not aware of any definition of &amp;quot;free market&amp;quot; which supposes that all players have equal leverage. As I understand it, an economy with powerful corporations and relatively weak workers could still satisfy the definition for &amp;#x27;free market&amp;#x27;; in other words, power dynamics are orthogonal to market freedom.</text></item><item><author>gjulianm</author><text>&amp;gt; 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.&lt;p&gt;&amp;gt;  Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower.&lt;p&gt;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&amp;#x27;t usually live too much without finding a job.&lt;p&gt;That&amp;#x27;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.</text></item></parent_chain><comment><author>fsckboy</author><text>&amp;gt; I&amp;#x27;m not aware of any definition of &amp;quot;free market&amp;quot; which supposes that all players have equal leverage.&lt;p&gt;bog standard microeconomics 101 uses as an assumption that no player can thru individual choices affect prices in the market, i.e. all players do have equal leverage, zero.&lt;p&gt;&amp;quot;free market&amp;quot; has more than one usage, but economics&amp;#x27;s conclusions are valid only if the assumptions are met.</text></comment>
<story><title>What harm do minimum wages do?</title><url>https://www.economist.com/schools-brief/2020/08/15/what-harm-do-minimum-wages-do</url></story><parent_chain><item><author>throwaway894345</author><text>&amp;gt; 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&amp;#x27;t usually live too much without finding a job.&lt;p&gt;I&amp;#x27;m generally in favor of stronger job protections and so on, but I&amp;#x27;m not aware of any definition of &amp;quot;free market&amp;quot; which supposes that all players have equal leverage. As I understand it, an economy with powerful corporations and relatively weak workers could still satisfy the definition for &amp;#x27;free market&amp;#x27;; in other words, power dynamics are orthogonal to market freedom.</text></item><item><author>gjulianm</author><text>&amp;gt; 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.&lt;p&gt;&amp;gt;  Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower.&lt;p&gt;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&amp;#x27;t usually live too much without finding a job.&lt;p&gt;That&amp;#x27;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.</text></item></parent_chain><comment><author>wtallis</author><text>If you&amp;#x27;re having a rational conversation with reasonable people, sure. But there are plenty of people who will insist that anything making a market less free is harmful, a bad idea and bad public policy. If you try to reconcile that, you may infer that they seem to be working with an unusually constrained definition of &amp;quot;free market&amp;quot;, but that&amp;#x27;s usually not the most straightforward explanation.</text></comment>