Model Battle
Should governments substantially increase the minimum wage?
This pilot-ready format asks teams to make assumptions visible before debating predictions.
Competitive Labour Market
- Assumptions
- Many employers compete for workers; wages reflect marginal productivity.
- Predicted effects
- A substantial minimum wage can reduce labour demanded when set above equilibrium.
- Strengths
- Makes wage floors, labour demand and unemployment channels explicit.
- Limitations
- Can understate employer wage-setting power.
Monopsony Labour Market
- Assumptions
- Employers have wage-setting power because labour supply to each firm is imperfectly elastic.
- Predicted effects
- A moderate minimum wage can raise both wages and employment up to a point.
- Strengths
- Explains why low pay may coexist with employer market power.
- Limitations
- Requires evidence about local hiring power and labour mobility.
Structured comparison framework
01
Which assumptions fit the case?
02
What evidence would distinguish the models?
03
Who gains and who loses?
04
What are the limits of each model?