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Minimum Wage Increases and Vacancies

Author

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  • Kudlyak, Marianna

    (Federal Reserve Bank of San Francisco)

  • Tasci, Murat

    (Federal Reserve Bank of Cleveland)

  • Tüzemen, Didem

    (Federal Reserve Bank of Kansas City)

Abstract

Using a unique data set and a novel identification strategy, we estimate the effect of minimum wage increases on job vacancy postings. Using occupation-specific county- level vacancy data from the Conference Board's Help Wanted Online for 2005-2018, we find that state-level minimum wage increases lead to substantial declines in existing and new vacancy postings in occupations with a larger share of workers who earn close to the prevailing minimum wage. We estimate that a 10 percent increase in the state- level effective minimum wage reduces vacancies by 2.4 percent in the same quarter, and the cumulative effect is as large as 4.5 percent a year later, in these occupations relative to the rest. The negative effect on vacancies is more pronounced for occupations where workers typically have lower educational attainment (high school or less) and in counties with higher poverty rates. We argue that our focus on vacancies versus on employment has a distinct advantage of highlighting a mechanism through which minimum wage hikes affect labor markets. Our finding of a negative effect on vacancies is not inconsistent with the wide range of findings in the literature about the effect of minimum wage changes on employment, which is driven by changes in both hiring and separation margins.

Suggested Citation

  • Kudlyak, Marianna & Tasci, Murat & Tüzemen, Didem, 2022. "Minimum Wage Increases and Vacancies," IZA Discussion Papers 15254, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp15254
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    Cited by:

    1. Nicolás Francisco Abbate & Bruno Jimnez, 2022. "Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina," Asociación Argentina de Economía Política: Working Papers 4533, Asociación Argentina de Economía Política.
    2. Arabzadeh, Hamzeh & Balleer, Almut & Gehrke, Britta & Taskin, Ahmet Ali, 2023. "Minimum Wages, Wage Dispersion and Financial Constraints in Firms," IZA Discussion Papers 16455, Institute of Labor Economics (IZA).
    3. Bustos, Emil, 2023. "The Effect of Centrally Bargained Wages on Firm Growth," Working Paper Series 1456, Research Institute of Industrial Economics.
    4. Nicolás Abbate & Bruno Jiménez, 2023. "Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina," CEDLAS, Working Papers 0310, CEDLAS, Universidad Nacional de La Plata.

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    More about this item

    Keywords

    search and matching; hiring; vacancies; minimum wage;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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