IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Minimum wages and youth unemployment

  • Gorry, Aspen

This paper constructs a labor search model to explore the effects of minimum wages on youth unemployment. To capture the gradual decline in unemployment for young workers as they age, the standard search model is extended so that workers gain experience when employed. Experienced workers have higher average productivity and lower job finding and separation rates that match wage and worker flow data. In this environment, minimum wages can have large effects on unemployment because they interact with a worker's ability to gain job experience. The increase in minimum wages between 2007 and 2009 can account for a 0.8 percentage point increase in the steady state unemployment rate and a 2.8 percentage point increase in unemployment for 15–24 year old workers in the model parameterized to simulate outcomes of high school educated workers. Minimum wages can also help explain the high rates of youth unemployment in France compared to the United States.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0014292113001104
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 64 (2013)
Issue (Month): C ()
Pages: 57-75

as
in new window

Handle: RePEc:eee:eecrev:v:64:y:2013:i:c:p:57-75
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Michael Elsby & Bart Hobijn & Aysegül Sahin, 2009. "Unemployment dynamics in the OECD," Working Paper Series 2009-04, Federal Reserve Bank of San Francisco.
  2. Richard Rogerson & Johanna Wallenius, 2007. "Micro and Macro Elasticities in a Life Cycle Model With Taxes," NBER Working Papers 13017, National Bureau of Economic Research, Inc.
  3. Guido Menzio & Irina A. Telyukova & Ludo Visschers, 2012. "Directed Search over the Life Cycle," PIER Working Paper Archive 12-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Neumark, David & Nizalova, Olena Y., 2004. "Minimum Wage Effects in the Longer Run," IZA Discussion Papers 1428, Institute for the Study of Labor (IZA).
  5. Bart Hobijn & Aysegul Sahin & Michael Elsby, 2010. "The Labor Market in the Great Recession," 2010 Meeting Papers 323, Society for Economic Dynamics.
  6. Aspen Gorry, 2012. "Experience and Worker Flows," 2012 Meeting Papers 154, Society for Economic Dynamics.
  7. Neumark, David & Wascher, William, 2007. "Minimum Wages and Employment," IZA Discussion Papers 2570, Institute for the Study of Labor (IZA).
  8. Daron Acemoglu & Jörn-Steffen Pischke, 2002. "Minimum Wages and On-the-Job Training," CEP Discussion Papers dp0527, Centre for Economic Performance, LSE.
  9. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, June.
  10. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  11. Neal, Derek, 1999. "The Complexity of Job Mobility among Young Men," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 237-61, April.
  12. Jacob Mincer & Linda S. Leighton, 1980. "Effect of Minimum Wages on Human Capital Formation," NBER Working Papers 0441, National Bureau of Economic Research, Inc.
  13. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2011. "Age-Dependent Employment Protection," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00623282, HAL.
  14. Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
  15. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  16. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  17. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
  18. Lothar Funk & Hagen Lesch, 2006. "Minimum Wage Regulations in Selected European Countries," Intereconomics: Review of European Economic Policy, Springer, vol. 41(2), pages 78-92, March.
  19. Fougere, Denis & Kramarz, Francis & Magnac, Thierry, 2000. "Youth employment policies in France," European Economic Review, Elsevier, vol. 44(4-6), pages 928-942, May.
  20. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-98, December.
  21. David Naumark & William Wascher, 2003. "Minimum wages, labor market institutions, and youth employment: a cross-national analysis," Finance and Economics Discussion Series 2003-23, Board of Governors of the Federal Reserve System (U.S.).
  22. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December.
  23. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  24. Guillaume Rocheteau & Murat Tasci, 2008. "Positive and normative effects of a minimum wage," Working Paper 0801, Federal Reserve Bank of Cleveland.
  25. Michael Pries & Richard Rogerson, 2005. "Hiring Policies, Labor Market Institutions, and Labor Market Flows," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 811-839, August.
  26. Julen Esteban‐Pretel & Junichi Fujimoto, 2014. "Life‐Cycle Labor Search With Stochastic Match Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 575-599, 05.
  27. Stephen Nickell & D Nicolitsas, 1994. "Wages," CEP Discussion Papers dp0219, Centre for Economic Performance, LSE.
  28. Richard Rogerson, 2007. "Structural Transformation and the Deterioration of European Labor Market Outcomes," NBER Working Papers 12889, National Bureau of Economic Research, Inc.
  29. Richard Rogerson, 2006. "Understanding Differences in Hours Worked," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 365-409, July.
  30. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
  31. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  32. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  33. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
  34. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
  35. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.
  36. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 1997. "Minimum Wages and Youth Employment in France and the United States," NBER Working Papers 6111, National Bureau of Economic Research, Inc.
  37. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  38. Bazen, Stephen & Skourias, Nicolas, 1997. "Is there a negative effect of minimum wages on youth employment in France?," European Economic Review, Elsevier, vol. 41(3-5), pages 723-732, April.
  39. Neumark, David & Wascher, William, 2003. "Minimum wages and skill acquisition: another look at schooling effects," Economics of Education Review, Elsevier, vol. 22(1), pages 1-10, February.
  40. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  41. Walter J. Wessels, 2005. "Does the Minimum Wage Drive Teenagers Out of the Labor Force?," Journal of Labor Research, Transaction Publishers, vol. 26(1), pages 169-176, January.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:64:y:2013:i:c:p:57-75. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.