Minimum Wage: Competitive Market vs Monopsony

This simulator compares how a minimum wage affects employment under two different market structures that share the same underlying labour supply and demand. In a competitive labour market, many employers bid for workers and none can set the wage — a minimum wage above the market-clearing level simply reduces the quantity of labour firms are willing to buy, producing textbook unemployment. In a monopsony — a single dominant employer, common in company towns, military bases, or a region with one hospital system — the employer already restricts both wages and hiring below the competitive optimum, because hiring one more worker means raising pay for everyone already on the payroll. A minimum wage set between the monopsonist's chosen wage and the competitive wage removes that distortion and can raise employment, the opposite of the competitive-market prediction — until the floor is pushed above the competitive wage, at which point employment falls in both structures alike.