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Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure

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  • Harry Holzer
  • Lawrence Katz
  • Alan Krueger

Abstract

This paper uses job applications- data to test the existence of non-competitive, ex-ante rents in the labor market. We first examine whether jobs that pay the legal minimum wage face an excessively of labor as measured by the number of job applications received for the most recent positions filled by the firs. The results indicate that openings for jobs that pay the minimum wage attract significantly more job applications than jobs that pay either more or less than the minimum wage. This spike in the job application rate distribution indicates that ex-ante rents generated for employees by an above market-level minimum wage do not appear to be completely dissipated by employer actions. The second part of the paper uses a similar approach to examine whether jobs in high-wage industries pay above market-clearing wage rates. We find a weak, positive relationship between inter-industry applications differentials and inter-industry wage differentials. In addition, our results indicate that employer size has a sizeable positive effect on the job application rate even after controlling for the wage rate. The paper considers several possible explanations for these findings.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 610.

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Date of creation: Apr 1988
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Handle: RePEc:pri:indrel:dsp01vt150j262

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Keywords: applications; job queues; minimum wage; industry wage structure;

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References

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  1. Alan Krueger, 1987. "The Determinants of Queues for Federal Jobs," Working Papers 607, Princeton University, Department of Economics, Industrial Relations Section..
  2. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
  3. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
  4. Charles Brown & Curtis Gilroy & Andrew Kohen, 1981. "Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment," NBER Working Papers 0790, National Bureau of Economic Research, Inc.
  5. Lang, Kevin, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 181-202, February.
  6. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  7. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, octubre-d.
  8. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  9. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
  10. Barron, John M & Bishop, John, 1985. "Extensive Search, Intensive Search, and Hiring Costs: New Evidence on Employer Hiring Activity," Economic Inquiry, Western Economic Association International, vol. 23(3), pages 363-82, July.
  11. Carmichael, Lorne, 1985. "Can Unemployment Be Involuntary? Comment [Equilibrium Unemployment as a Worker Discipline Device]," American Economic Review, American Economic Association, vol. 75(5), pages 1213-14, December.
  12. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
  13. Wessels, Walter J, 1980. "The Effect of Minimum Wages in the Presence of Fringe Benefits: An Expanded Model," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 293-313, April.
  14. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  15. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  16. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
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Citations

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Cited by:
  1. Lawrence F. Katz & Lawrence H. Summers, 1988. "Can Inter-Industry Wage Differentials Justify Strategic Trade Policy?," NBER Working Papers 2739, National Bureau of Economic Research, Inc.
  2. James B. Rebitzer & Lowell J. Taylor, 1991. "The Consequences of Minimum Wage Laws: Some New Theoretical Ideas," NBER Working Papers 3877, National Bureau of Economic Research, Inc.
  3. Harry J. Holzer, 1990. "Wages, employer costs, and employee performance in the firm," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 147-164, February.
  4. Nadja Dwenger & Pia Rattenhuber & Viktor Steiner, 2011. "Sharing the burden: Empirical evidence on corporate tax incidence," Working Papers sharing_the_burden, Max Planck Institute for Tax Law and Public Finance.
  5. William T. Dickens & Kevin Lang, 1992. "Labor Market Segmentation Theory: Reconsidering the Evidence," NBER Working Papers 4087, National Bureau of Economic Research, Inc.
  6. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.

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