Editing Minimum wage (section)

===Criticisms of the supply and demand model===
The argument that a minimum wage decreases employment is based on a simple supply and demand model of the labor market. A number of economists, such as [[Pierangelo Garegnani]],<ref>{{cite journal |first1=P. |last1=Garegnani |title=Heterogeneous Capital, the Production Function and the Theory of Distribution |journal=The Review of Economic Studies |volume=37 |issue=3 |date=July 1970 |pages=407–36 |jstor=2296729 |doi=10.2307/2296729}}</ref> Robert L. Vienneau,<ref>{{cite journal |doi=10.1111/j.1467-9957.2005.00467.x |title=On Labour Demand and Equilibria of the Firm |year=2005 |last1=Vienneau |first1=Robert L. |journal=The Manchester School |volume=73 |issue=5 |pages=612–19|s2cid=153778021 }}</ref> and Arrigo Opocher and [[Ian Steedman]],<ref>{{cite journal |doi=10.1093/cje/bep005 |title=Input price-input quantity relations and the numeraire |year=2009 |last1=Opocher |first1=A. |last2=Steedman |first2=I. |journal=Cambridge Journal of Economics |volume=33 |issue=5 |pages=937–48}}</ref> building on the work of [[Piero Sraffa]], argue that that model, even given all its assumptions, is logically incoherent. Michael Anyadike-Danes and [[Wynne Godley]] argue, based on simulation results, that little of the empirical work done with the textbook model constitutes a potentially [[Falsifiability|falsifiable theory]], and consequently empirical evidence hardly exists for that model.<ref>{{cite journal |doi=10.1111/j.1467-9957.1989.tb00809.x |title=Real Wages and Employment: A Sceptical View of Some Recent Empirical Work |year=1989 |last1=Anyadike-Danes |first1=Michael |last2=Godley |first2=Wynne |journal=The Manchester School |volume=57 |issue=2 |pages=172–87}}</ref> Graham White argues, partially on the basis of Sraffianism, that the policy of increased [[labor market flexibility]], including the reduction of minimum wages, does not have an "intellectually coherent" argument in economic theory.<ref>{{cite journal |first1=Graham |last1=White |title=The Poverty of Conventional Economic Wisdom and the Search for Alternative Economic and Social Policies |journal=The Drawing Board: An Australian Review of Public Affairs |volume=2 |issue=2 |date=November 2001 |pages=67–87 |url=http://www.australianreview.net/journal/v2/n2/white.html |url-status=live |archive-url=https://web.archive.org/web/20130524091537/http://www.australianreview.net/journal/v2/n2/white.html |archive-date=24 May 2013 }}</ref>

Gary Fields, Professor of Labor Economics and Economics at [[Cornell University]], argues that the standard textbook model for the minimum wage is ambiguous, and that the standard theoretical arguments incorrectly measure only a one-sector market. Fields says a two-sector market, where "the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage ... [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]," is the basis for better analysis. Through this model, Fields shows the typical theoretical argument to be ambiguous and says "the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a non-covered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on."<ref>{{cite journal |doi=10.1108/01437729410059323 |title=The Unemployment Effects of Minimum Wages |year=1994 |last1=Fields |first1=Gary S. |journal=International Journal of Manpower |volume=15 |issue=2 |pages=74–81|url=https://digitalcommons.ilr.cornell.edu/articles/1118 |hdl=1813/75106 |hdl-access=free }}</ref>

An alternate view of the labor market has low-wage labor markets characterized as [[monopsonistic competition]] wherein buyers (employers) have significantly more [[market power]] than do sellers (workers). This monopsony could be a result of intentional [[collusion]] between employers, or naturalistic factors such as [[Labor market segmentation|segmented markets]], [[search cost]]s, [[Information asymmetry|information costs]], [[Geographic mobility|imperfect mobility]] and the personal element of labor markets.{{citation needed|date=October 2016}} Such a case is a type of [[market failure]] and results in workers being paid less than their marginal value. Under the monopsonistic assumption, an appropriately set minimum wage could increase both [[wages]] and employment, with the optimal level being equal to the [[marginal product of labour|marginal product of labor]].<ref name="Manning2003">{{cite book |title=Monopsony in motion: Imperfect Competition in Labor Markets |last=Manning |first=Alan |year=2003 |publisher=Princeton University Press |location=Princeton, NJ |isbn=978-0-691-11312-8 }}{{page needed|date=December 2013}}</ref> This view emphasizes the role of minimum wages as a [[regulated market|market regulation]] policy akin to [[antitrust]] policies, as opposed to an illusory "[[free lunch]]" for low-wage workers.

Another reason minimum wage may not affect employment in certain industries is that the demand for the product the employees produce is highly [[Price elasticity of demand|inelastic]].<ref>{{cite book |author=Gillespie, Andrew|title=Foundations of Economics|page=240|publisher=Oxford University Press|year=2007}}</ref> For example, if management is forced to increase wages, management can pass on the increase in wage to consumers in the form of higher prices. Since demand for the product is highly inelastic, consumers continue to buy the product at the higher price and so the manager is not forced to lay off workers. Economist [[Paul Krugman]] argues this explanation neglects to explain why the firm was not charging this higher price absent the minimum wage.<ref>{{cite book |last=Krugman |first=Paul|title=Economics|page=385|publisher=Worth Publishers|year=2013}}</ref>

Three other possible reasons minimum wages do not affect employment were suggested by [[Alan Blinder]]: higher wages may reduce [[turnover (employment)|turnover]], and hence training costs; raising the minimum wage may "render moot" the potential problem of recruiting workers at a higher wage than current workers; and minimum wage workers might represent such a small proportion of a business' cost that the increase is too small to matter. He admits that he does not know if these are correct, but argues that "the list demonstrates that one can accept the new empirical findings and still be a card-carrying economist".<ref>{{cite news |first=Alan S. |last=Blinder |title=The $5.15 Question |work=The New York Times |date=23 May 1996 |page=A29 |url=https://www.nytimes.com/1996/05/23/opinion/the-5.15-question.html |url-status=live |archive-url=https://web.archive.org/web/20170701015950/http://www.nytimes.com/1996/05/23/opinion/the-5.15-question.html |archive-date=1 July 2017 }}</ref>