In monopsony situations, a minimum wage might increase wage and employment levels.

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In a monopsony, where there is only one buyer (employer) in the labor market, setting a minimum wage above the equilibrium wage can increase both wages and employment levels. This is because the monopsonist controls the wage rate and typically sets it lower than in a competitive market, resulting in fewer jobs filled. A minimum wage can counteract this by making it more expensive for the monopsonist to pay below a certain level, encouraging them to hire more workers up to the point where the marginal cost of labor equals the marginal revenue product of labor.

In Monopsony Situations, a Minimum Wage Might Increase Wage and Employment