5.10
Their employment, of course, will produce extra output, which has to
be sold; but a MVP of labor higher than the wage indicates that it is
profitable to employ more labor even if product prices have to be lowered
or advertising expenditures increased in order to sell the additional
output produced by the additional workers.
If the argument has an unrealistic, even utopian ring, that merely shows
how far we have progressed from employer-dominated labor markets. For the price-make
buyer's situation I just depicted is the exact counterpart of the price-maker
seller's; and there is nothing unusual about a seller's welcoming new buyers,
anxious to sell as much more as he can, and making a good profit on his
extra sales. The only difference bet’veen the two cases is that the
monopolistic seller wants customers able to pay, the monopsonistic employer
v;ants workers able to work; and the ability to work is more widely and evenly
distributed than the ability to pay.
However, the price-maker employer's excess demand for labor is limited,
because the MVP of labor is a decreasing function of the employer's level
of employment; and as it falls to equality with the wage, it eliminates the
employer's marginal gain, the gap between the MVP and the wage, which creates