At Marginal Revolution Alex Tabarrok takes an interesting perspective on the minimum wage increase.  Consider an employer who pays more than the minimum wage.  How would that employer be affected?

Indeed, these employers will benefit from an increase in the minimum wage because it will raise the costs of their rivals.

(Based on this conclusion, he looks suspiciously on claims by some employers that they are cheering the minimum wage for moral reasons.)

While it is true that a rise in the minimum wage will raise the costs of their rivals, this is not the end of the story, and looking one step further can reverse the conclusion.   Firms have to compete for workers and if my rival must pays a higher wage, then my own workers now find her to be a more attractive employer at the margin.  To restore the balance, I will typically have to raise my own wage.

For example, this would be true if I have to compete with my rival for workers but workers have a higher disutility of working for me.

Now this assumes that the minimum wage does not create a shortage of jobs for my rival, i.e. excess supply of labor.  There is good empirical evidence that the minimum wage does not have this effect.

However, if the rival has elastic demand for labor, then the conclusion can be reversed yet again.  Increasing the minimum wage cuases the rival to employ fewer workers which increases labor supply for me and allows me to lower my wage.  So in addition to raising my rival’s costs, the minimum wage lowers my own costs.

Note however that in the equilibrium of this last model there is a shortage of minimum wage jobs.  This means that the marginal high-wage worker would prefer to quit and go work for the minimum-wage firm but is unable to because there are no vacancies there.  That doesn’t sound very realistic.