[PEN-L:2431] Re: unions

[Gilbert Skillman <gskillman@xxxxxxxxxxxxxxxxx>]

Jim writes:

> BTW, on another topic: Barro rejects minimum wages because demand
> curves are always downward-sloping? this not only ignores
> Giffen-type effects, as seems reasonable to do, but it ignores the
> distinction between product and input markets while assuming full
> employment. The demand for inputs is "derived demand," so that
> (given inelastic labor demand) generally higher wages might
> increase aggregate demand, causing the demand-for-labor-power
> curve to shift rightward. This, in effect, implies an
> upward-sloping _aggregate_ demand-for-labor-power curve despite
> downward-sloping micro-economic d-f-l-p curves.

Barro also assumes what must be proven, i.e. that "demand curves" are
in markets for labor power are both well-defined and operational.
The former is not the case if buyers for labor power are not
price-takers; the latter is not the case, e.g., if such markets are
incomplete in the sense of being characterized by efficiency-wage
type problems.

Gil Skillman