Editing Minimum wage (section)

===Monopsony===
[[File:Monopsony3.png|thumb|Modern economics suggests that a moderate minimum wage may increase employment as labor markets are [[Monopsony|monopsonistic]] and workers [[Inequality of bargaining power|lack bargaining power]].]]
{{Main|Monopsony}}
The supply and demand model predicts that raising the minimum wage helps workers whose wages are raised, and hurts people who are not hired (or lose their jobs) when companies cut back on employment. But proponents of the minimum wage hold that the situation is much more complicated than the model can account for. One complicating factor is possible [[monopsony]] in the labor market, whereby the individual employer has some market power in determining wages paid. Thus it is at least theoretically possible that the minimum wage may boost employment. Though single employer market power is unlikely to exist in most labor markets in the sense of the traditional '[[company town]],' asymmetric information, imperfect mobility, and the personal element of the labor transaction give some degree of wage-setting power to most firms.<ref>{{cite journal |first1=William M. |last1=Boal |first2=Michael R |last2=Ransom |date=March 1997 |title=Monopsony in the Labor Market |journal=Journal of Economic Literature |volume=35 |issue=1 |pages=86–112 |jstor=2729694}}</ref>

Modern economic theory predicts that although an excessive minimum wage may raise unemployment as it fixes a price above most demand for labor, a minimum wage at a more reasonable level can increase employment, and enhance growth and efficiency. This is because labor markets are [[Monopsony|monopsonistic]] and workers persistently [[Inequality of bargaining power|lack bargaining power]]. When poorer workers have more to spend it stimulates [[effective aggregate demand]] for goods and services.<ref>e.g. DE Card and AB Krueger, ''Myth and Measurement: The New Economics of the Minimum Wage'' (1995) and S Machin and A Manning, 'Minimum wages and economic outcomes in Europe' (1997) 41 European Economic Review 733</ref><ref name=Rittenberg>{{cite book|last1=Tregarthen|first1=Timothy|last2=Rittenberg|first2=Libby|title=Economics|year=1999|publisher=Worth Publishers|location=New York|isbn=9781572594180|page=290|edition=2nd|url=https://books.google.com/books?id=HveHgrID5GYC&q=monopsony+minimum+wage&pg=PA290|access-date=21 June 2014}}</ref>