The argument in favour of raising the minimum wage is that there is monopsony. Employers have market power and so are able to artificially depress wages. If this were true then another employer raising their wage would not filter through to others. Because the others have that market power to not have to do it.
also, if this were true, monopsony, then a rise in wages should be greeted with a rise in employment.
Can we test this? Yes we can:
Between 2014 and 2019, five major national retailers — Amazon, Walmart, Target, CVS, and Costco — implemented company-wide minimum wages. Ellora Derenoncourt, Clemens Noelke, David Weil, and Bledi Taska investigate the impacts of these policies on low-wage workers who are not employed by these firms in Spillover Effects from Voluntary Employer Minimum Wages (NBER Working Paper 29425). They first illustrate their findings using Amazon’s $15 minimum wage, which was announced in October 2018 and took effect that November 1. They then show these patterns generalize to the other large retailer minimum wages.
Utilizing data from approximately 7 million online job postings between February 2014 and February 2020, the researchers find that a 10 percent rise in average Amazon wages is associated with an increase of 2.3 percent in the average advertised wage at non-Amazon firms in the same labor market.
Oh. Wages are determined by the wages on offer elsewhere. That’s standard free market stuff then, no monopsony there.
When large retailers raise minimum wages, there are also small drops in employment. The estimates range from a 0.4 percent to a 1.3 percent decline in employment at firms other than the major retailer when Amazon’s or a similar firm’s minimum wage raises other firms’ wages by 10 percent. These estimated employment effects are comparable to some recent estimates in the minimum wage literature.
Ah, so the monopsony argument is bollocks then.