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If that is the case that min wage laws are a major cause then it is definitely a case of baumol, because the wages would be increasing beyond the underlying pro
by blactuary 4y ago
If that is the case that min wage laws are a major cause then it is definitely a case of baumol, because the wages would be increasing beyond the underlying productivity due to external factors. We expect wages to rise with gains in productivity, but the sectors of the economy that don't have any gains will necessarily increase along with the ones that do, because of labor market competition, minimum wage laws, etc. It puts a strain on those industries, just like we are seeing in child care