Ross Gittins’ column in Saturday’s Sydney Morning Herald was devoted to the topic of minimum wages. Among other things, he explained the ‘dynamic monopsony’ model of labour markets. These models are associated in particular with Alan Manning of the London School of Economics, who set out the theory at length in his 2003 book Monopsony in Motion: Imperfect Competition in Labor Markets.
How would we know if the labour market was ‘flexible’? One way is to look at how the jobs market responds to economic shocks. During the GFC, when the Howard Government’s labour laws were still in effect, the number of hours worked in Australia fell while the number of people in employment didn’t fall.