Minimum wage, the short version

Economists tend to fall into one of two camps on minimum wage. One camp, the classically liberal, view minimum wage as always above the equilibrium price since someone will always work at a lower price than the one mandated by government. The other camp, the heterodox, view minimum wage levels as a function of the prevailing labor market, in which it is a minimum set so low that few people if any ever work for it.

Under this view, the minimum wage sets a benchmark which prevents workers from being as victimized by oligopsony and monopsony(few buyers of an input and only one buyer of an input). When there is no minimum wage, then the labor market in rural areas turns into de facto serfdom because the lack of employers means that labor is always undervalued. The friction between the company and the worker in the 19th century in rural areas led to the often violent confrontation between management and labor. Setting boundaries such as a minimum wage helps reduce this strife by keeping workers from being paid the lowest possible wage the market allows, while as the cost of keeping some of the least skill unemployed.