In the monopsony view view, search frictions in the labour market generate upward sloping labour supply curves to individual firms even when firms are small relative to the labour market.
Peter Kuhn in a great review of monopsony in motion pointed out the correct title was search fictions with wage posting and random matching in motion.This precision is important because, as Kuhn goes on to say:
“Manning clearly recognizes this weakness of search-based monopsony models, and does his best to address it in his discussion of ‘random’ vs. ‘balanced’ matching on pages 284–96. Manning’s basic general-equilibrium monopsony model, set out in chapter 2, assumes ‘random matching’, which means that, regardless of its size, every firm—from the local bakery to Microsoft—receives the same absolute number of job applications per period. The only way for a firm to expand its scale of operations in this model is to offer a higher wage… it is absolutely critical to the search-based monopsony model at the core of this book that there be diminishing returns to scale in the technology for recruiting new workers. In other words, for the theory to apply, firms must find it harder to recruit a single new worker the larger the absolute number of workers they currently employ.”
The evidence in favour of the monopoly view of minimum wage is is not as good as people think.
Under this monopsony view of minimum wages – an upward sloping supply curve of labour – an increase in the minimum wage increases both wages and employment.
That is, there is a very specific joint hypothesis of both more employment and more wages and as there are more workers in the workplace, higher output which the employer can only sell by cutting their prices.
David Henderson made very good points along this line when he reviewed David Card’s book back in 1994:
Interestingly, Card’s and Krueger’s own data on price contradict one of the implications of monopsony. If monopsony is present, a minimum wage can increase employment. These added employees produce more output. For a given demand, therefore, a minimum wage should reduce the price of the output. But Card and Krueger find the opposite. They write: ‘[P]retax prices rose 4 percent faster as a result of the minimum-wage increase in New Jersey…’ (p. 54). If their data on price are to be believed, they have presented evidenceagainst the existence of monopsony. David R. Henderson, “Rush to Judgment,”MANAGERIAL AND DECISION ECONOMICS, VOL. 17, 339-344 (1996)
Utopia, you are standing in it! 
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