Let’s say your labor is worth $10 an hour but you won’t go back to work for less than $12, thereby leading to the unemployment of you.
In essence you are self-imposing a minimum wage on that market, but the employer is responding by leaving you jobless. (Analogous to “self-deportation,” a sarcastic wag might suggest.)
Let’s say, alternatively, that you finally decided to settle for $10 but the law now stipulates $12. It’s not quite the same (“the public regime has shifted”), but still I can imagine that an employer, if he did not hire you in the first setting, also would not hire you in the second setting with the higher legal minimum.
Keynesians believe that worker-imposed minimum wages do not lead to reemployment very readily. Other people, some of whom are also Keynesians, believe that state-imposed minimum wages are reasonably consistent with employment/reemployment.
If there is significant monopsony in labor markets, can a worker-imposed minimum wage improve outcomes?
I know many economists who will argue: “let’s raise the state-imposed minimum wage. Employers will respond by creating higher-productivity jobs, or by paying more, and few jobs will be lost.” I do not know many Keynesians who will argue: “In light of the worker-imposed minimum wage, employers will respond by creating higher-productivity jobs, or by paying more, and few jobs will be lost.”
Again, I am not saying that the worker-imposed minimum wage and the state-imposed minimum wage are identical in their nature. Still, it would be interesting, in terms of a model, to deduce where the relevant difference comes from.
Is the difference that the worker-imposed minimum wage is too high? That the worker has not publicly precommitted to his or her personal stubbornness? That a legal minimum wage applies to a larger and broader class of workers? Something else?
In policy terms, does it suffice to argue that minimum wage increases should be restricted to periods of high or at least adequate demand? Have you noticed that is not what we are seeing?
Addendum: For an additional exercise, under what model are your views on the minimum wage, sticky nominal wages, and payroll tax cuts consistent? Consider please a payroll tax for each side of the market. Toss in the liquidity trap for true extra credit.