[bayesian_horse]

Look for "Nash equilibrium". Game theory makes it really hard for all companies in a free market to conspire to keep wages down. Can they conspire to a small degree? Certainly, probably disguised as a cultural or traditional bias.

Employers don't pay $5 per hour because they wouldn't make a profit either.

[pretendscholar]

That's a theory that only models certain market conditions. In practice there is an information asymmetry (contrary to the presuppositions of the Nash Equilibrium) and often the employer side has a small number of companies so coordination is easier. Check out this settlement from the 2000s in Silicon Valley[1]. This involves highly desired, well educated employees so imagine how it is in other fields.

In my own experience I've had several prospective employers at conferences say that they were interested in poaching me but mentioned that they were wary to start a poaching war. They knew the CEO of my company and were conscious of the fact that he would likely make an effort to respond in kind. The Nash Equilibrium is an interesting concept but reality is complex and messy.

[1] https://equitablegrowth.org/aftermath-wage-collusion-silicon...

[bayesian_horse]

That is a particularly niche situation...

[pretendscholar]

Take your pick. Even just in the tech sector in silicon valley there are many examples of collusion. Mind you this involves some of the most desirable employees on the planet.

But back to the central point the basic nash equilibrium is in the spherical cow realm of models as they relate to actual reality. There are some interesting additions to it involving time series and asymmetrical information to try and model real economic data.

[psyfi]

> Employers don't pay $5 per hour because they wouldn't make a profit either.

Nope, they might be able to make profit at $5 or $10/hr, but there it doesn't make sense to pay more than you have to, that's why Chinese devices are significantly cheaper than their western counterparts, they can still compete if they raise the prices but they can allocate cheap labor in china that allows them to become a strong competitor

[bayesian_horse]

We're talking about African economies. Those businesses don't have margins that would allow a five times higher wage while still making profits.

Big tech companies, maybe. But even those.

Once you raise prices the demand shrinks which also leads to smaller profits. There's no free lunch. If employers could make more money by paying higher wages, they generally would.

[benlivengood]

Without free movement of workers across borders labor is not a free market.

[bayesian_horse]

Free enough. Especially in large enough countries the market is free enough. There is no such thing as a completely free market. But in general, and in most places, no, most employers can't conspire to dump wages. Even if it looks like conspiracy, it may be something else, like a bidding war on the supply side.