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Minimum Wage Shocks, Employment Flows, and Labor Market Frictions

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  • Arindrajit Dube
  • T. William Lester
  • Michael Reich

Abstract

We provide the first estimates of the effects of minimum wages on employment flows in the US labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have a sizable negative effect on employment flows but not on stocks. Separations and accessions fall among affected workers, especially those with low tenure. We do not find changes in the duration of nonemployment for separations or hires. This evidence is consistent with search models with endogenous separations.

Suggested Citation

  • Arindrajit Dube & T. William Lester & Michael Reich, 2016. "Minimum Wage Shocks, Employment Flows, and Labor Market Frictions," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 663-704.
  • Handle: RePEc:ucp:jlabec:doi:10.1086/685449
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    Cited by:

    1. Brian Bell & Stephen Machin, 2018. "Minimum Wages and Firm Value," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 159-195.
    2. repec:eee:labeco:v:47:y:2017:i:c:p:163-181 is not listed on IDEAS
    3. David Neumark, 2017. "The Employment Effects of Minimum Wages: Some Questions We Need to Answer," NBER Working Papers 23584, National Bureau of Economic Research, Inc.
    4. repec:bla:ecinqu:v:55:y:2017:i:4:p:1712-1737 is not listed on IDEAS
    5. Grace Lordan & David Neumark, 2017. "People Versus Machines: The Impact of Minimum Wages on Automatable Jobs," NBER Working Papers 23667, National Bureau of Economic Research, Inc.
    6. repec:bla:labour:v:31:y:2017:i:4:p:480-493 is not listed on IDEAS
    7. Riley, Rebecca & Rosazza Bondibene, Chiara, 2017. "Raising the standard: Minimum wages and firm productivity," Labour Economics, Elsevier, vol. 44(C), pages 27-50.
    8. Bachmann, Ronald & Penninger, Marion & Schaffner, Sandra, 2015. "The effect of minimum wages on labour market flows: Evidence from Germany," Ruhr Economic Papers 598, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Bossler, Mario & Broszeit, Sandra, 2016. "Do minimum wages increase job satisfaction? : micro data evidence from the new German minimum wage," IAB Discussion Paper 201615, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage: Evidence from establishment-level micro data," Annual Conference 2016 (Augsburg): Demographic Change 145926, Verein für Socialpolitik / German Economic Association.
    11. Evan Totty, 2017. "The Effect Of Minimum Wages On Employment: A Factor Model Approach," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1712-1737, October.
    12. Giulia Giupponi & Stephen Machin, 2018. "Changing the Structure of Minimum Wages: Firm Adjustment and Wage Spillovers," CEP Discussion Papers dp1533, Centre for Economic Performance, LSE.
    13. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage : evidence from establishment-level micro data," IAB Discussion Paper 201610, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    14. E. Mark Curtis & Ryan Decker, 2018. "Entrepreneurship and State Taxation," Finance and Economics Discussion Series 2018-003, Board of Governors of the Federal Reserve System (U.S.).
    15. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2017. "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle," NBER Working Papers 23532, National Bureau of Economic Research, Inc.
    16. Pessoa de Araujo, Ana Luisa, 2017. "Wage Inequality and Job Stability," Working Papers 5, Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute.
    17. repec:spr:izalbr:v:6:y:2017:i:1:d:10.1186_s40172-017-0058-z is not listed on IDEAS

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