It’s a two sided market. The clearing price is going to be dependent on the employer’s alternatives and the employees alternatives, and each sides judgements a

It’s a two sided market. The clearing price is going to be dependent on the employer’s alternatives and the employees alternatives, and each sides judgements about the other sides alternatives. The employer generally will try to pay just enough to prevent an employee from jumping ship, subject to bad feelings about unfairness reducing productivity. Part of the set of alternatives that an employee has are local jobs, which vary in pay somewhat based on cost of living.