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Minimum Wage Shocks, Employment Flows and Labor Market Frictions

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  • Dube, Arindrajit
  • Lester, T. William
  • Reich, Michael

Abstract

We provide the first estimates of the effects of minimum wages on employment flows in the U.S. labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have sizeable negative effect on employment flows but not stocks. Separations and accessions fall among affected workers, especially those with low tenure. We do not find changes in the duration of non-employment for separations or hires. This evidence is consistent with search models with endogenous separations, but explanations focused only on quits or only on layoffs are unlikely to explain the full complement of findings.

Suggested Citation

  • Dube, Arindrajit & Lester, T. William & Reich, Michael, 2013. "Minimum Wage Shocks, Employment Flows and Labor Market Frictions," Institute for Research on Labor and Employment, Working Paper Series qt27z0006g, Institute of Industrial Relations, UC Berkeley.
    • Handle: RePEc:cdl:indrel:qt27z0006g
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    Cited by:

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    3. E. Mark Curtis & Barry T. Hirsch & Mary C. Schroeder, 2016. "Evaluating Workplace Mandates with Flows Versus Stocks: An Application to California Paid Family Leave," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 501-526, October.
    4. John Schmitt, 2015. "Explaining the Small Employment Effects of the Minimum Wage in the United States," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 547-581, October.
    5. Daniele Tavani & Luca Zamparelli, 2020. "Labor-augmenting technical change and the labor share: New microeconomic foundations," Working Papers PKWP2004, Post Keynesian Economics Society (PKES).
    6. Reich, MIchael & Jacobs, Ken & Bernhardt, Annette, 2014. "Local Minimum Wage Laws: Impacts on Workers, Families and Businesses," Institute for Research on Labor and Employment, Working Paper Series qt9pf1225f, Institute of Industrial Relations, UC Berkeley.
    7. Steven J. Davis & John Haltiwanger, 2014. "Labor Market Fluidity and Economic Performance," NBER Working Papers 20479, National Bureau of Economic Research, Inc.

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