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Difficult to Reconcile This Fact With Assertions of Widespread Monopsony Power in American Labor Markets

A few weeks ago I read, for the first time since 1988, Bob Higgs’s 1971 volume, The Transformation of the American Economy, 1865-1914.  In its 127 pages of eloquent text is more sound economics, more relevant facts (many of them quantitative), and more economic wisdom than is found in any 999 of every 1,000 economic books published in the past half-century.  (Note to young economists: I strongly encourage you to read this book.  I do so not only for all the reasons mentioned in the previous sentence but also so that you might study Bob’s writing style.  It’s unusually beautiful in its simplicity and crystal clarity.)

Anyway, here’s a passage (from page 49) that is especially germane to an on-going discussion here at Cafe Hayek:

The overall impression of scholars who have studied migration patterns is that Americans moved readily in an attempt to improve their economic condition.  This high mobility played an important role in the successful functioning of a geographically vast market economy.

Remember, Bob here refers to worker migration that occurred during the half-century following the end of the U.S. Civil War.  By nearly all measures, ordinary American workers back then were vastly poorer than are even the poorest American workers today.  Also, communication was more intermittent and far slower than it is now.  And yet, American workers of more than a century ago routinely quit jobs in search of better ones, while other American workers were regularly lured away from their current jobs by enterprising entrepreneurs.  Therefore, anyone who justifies minimum-wage legislation today with the assertion that monopsony power infects the market for low-skilled labor must meet an especially heavy burden of persuasion.  Such believers in monopsony must plausibly explain why workers today – with these workers’ (and employers’) easy access to instant communication, as well to these workers’ easier ability to save and to borrow – are less mobile than were poorer and much-more-poorly informed workers of the 1865-1914 period.

As my colleague Bryan Caplan would agree, no such plausible explanation has been offered.  Not even close.


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