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Old 05-05-2012, 01:27 AM   #92
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Default Re: Socialism sucks....seriously.

Quote:
Originally Posted by abraxas21 View Post
i think you are confused. as it is pictured in all economics textbooks, job providers represent the demand and job seekers (along with the ones who are already working) are the supply. this is so because companies are willing to buy (i.e. they demand) labour which is sold by the workers (i.e. they are the supply).
Depends which way you look at it. In my explanation I was looking at it from the point of view of the worker. Job seekers (workers) demand the job and job providers (employers) supply the job. Fewer workers reduces demand, hence jobs become "cheaper" to the worker (less work, more pay). Fewer employers reduces supply, hence jobs become "more expensive" to the worker (more work, less pay).


Quote:
Originally Posted by abraxas21 View Post
as for your description of how the labour market works, i think it leaves out a lot of relevant info. for starters, when assessing the labour market we have to begin with the notion that it ain't perfect... far from it actually. what we have in most nations are monopsonies (the reverse of monopoly: the suppliers are too many in relation to the buyers and therefore the latter tend to be in a position of relative power) which is of course inefficient both in the salaries paid as in the companies' output. thus, in this scenario, when the government sets an apropriate minimum wage, it doesn't necessarily discourage unemployment. card and krueger were the first to study this phenomena and since then many economists have taken note of it.

this is one of the many examples in which economic 101 theory doesn't apply to the real world, which will always be infinitely more complicated and always imperfect.
For me the minimum wage is not a significant issue. Many countries have them but they're usually so low as to not affect the economy in a major way. I believe Australia has the highest minimum wage at $15/hour. This is much too high but they can afford it because their citizens are generally in high skilled high paid jobs so few people are affected.
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