Minimum Wages and Youth Employment

Gorry, Aspen (2010): Minimum Wages and Youth Employment.

Abstract

Significant employment differences between the US and Europe are concentrated among young workers. This paper constructs a labor search model that accounts for age patterns of employment. Work experience reduces the probability that workers lose their jobs. By introducing minimum wages, the model explains empirical findings on the effects of minimum wage laws. In addition, the model shows that minimum wages can account for about half of the differences in youth employment between Europe and the United States.

• Item Type: MPRA Paper
• Language: English
• Keywords: Minimum wages; youth employment; France; United States
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search

References

Abowd, John M., Francis Kramarz, Thomas Lemieux, and David N. Margolis, “Minimum Wages and youth Employment in France and the United States,” 1997. NBER Working Paper 6111.

Bazen, Stephen and Nicolas Skourias, “Is there a negative effect of minimum wages on youth employment in France?,” European Economic Review, April 1997, 41 (3-5), 723–732.

Card, David and Alan B Krueger, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review, September 1994, 84 (4), 772–93.

Cohen, Daniel, Arnaud Lefranc, and Gilles Saint-Paul, “French unemployment: a transatlantic perspective,” Economic Policy, October 1997, 12 (25), 265–292.

Dolado, Juan, Francis Kramarz, Stephen Machin, Alan Manning, David Margo- lis, Coen Teulings, Gilles Saint-Paul, and Michael Keen, “The Economic Impact of Minimum Wages in Europe,” Economic Policy, October 1996, 11 (23), 317–372.

Flinn, Christopher J., “Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates,” Econometrica, 07 2006, 74 (4), 1013–1062.

Fougere, Denis, Francis Kramarz, and Thierry Magnac, “Youth employment policies in France,” European Economic Review, May 2000, 44 (4-6), 928–942.

Funk, Lothar and Hagen Lesch, “Minimum Wage Regulations in Selected European Countries,” Intereconomics: Review of European Economic Policy, March 2006, 41 (2), 78–92.

Gorry, Aspen, “Experience and Worker Flows,” January 2010. Unpublished, UC, Santa Cruz.

Hosios, Arthur J, “On the Efficiency of Matching and Related Models of Search and Unemployment,” Review of Economic Studies, April 1990, 57 (2), 279–98.

Jovanovic, Boyan, “Job Matching and the Theory of Turnover,” Journal of Political Econ- omy, October 1979, 87 (5), 972–90.

Keane, Michael P and Kenneth I Wolpin, “The Career Decisions of Young Men,” Journal of Political Economy, June 1997, 105 (3), 473–522.

Ljungqvist, Lars and Thomas Sargent, “The European Unemployment Dilemma,” Journal of Political Economy, June 1998, 106 (3), 514–550.

Mortensen, Dale T, “Wages, Separations, and Job Tenure: On-the-Job Specific Training or Matching?,” Journal of Labor Economics, October 1988, 6 (4), 445–71.

Mortensen, Dale T and Christopher A Pissarides, “Job Creation and Job Destruction in the Theory of Unemployment,” Review of Economic Studies, July 1994, 61 (3), 397–415.

Neal, Derek, “The Complexity of Job Mobility among Young Men,” Journal of Labor Economics, April 1999, 17 (2), 237–61.

Neumark, David and Olena Nizalova, “Minimum Wage Effects in the Longer Run,” NBER Working Papers 10656, National Bureau of Economic Research, Inc July 2004.

Neumark, David and William Wascher, “Minimum wages and skill acquisition: another look at schooling effects,” Economics of Education Review, February 2003, 22 (1), 1–10.

Neumark, David and William Wascher, “Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross- National Analysis,” Industrial & Labor Relations Review, 2004, 57 (2), 223–248.

Neumark, David and William Wascher, “Minimum Wages and Employment,” IZA Discussion Papers 2570, Institute for the Study of Labor (IZA) January 2007.

OECD, “Special Feature: The Tax Treatment of Minimum Wages,” Technical Report, OECD Taxing Wages 2005/2006 2006.

Paternoster, Anne, “Minimum Wages: EU Member States, Candidate Countries and the US 2004,” EuroStat, Statistics in Focus October 2004.

Petrongolo, Barbara and Christopher A. Pissarides, “Looking into the Black Box: A Survey of the Matching Function,” Journal of Economic Literature, June 2001, 39 (2), 390–431.

Pissarides, Christopher A., “Short-Run Equilibrium Dynamics of Unemployment, Va- cancies, and Real Wages,” The American Economic Review, September 1985, 75 (4), 676–690.

Prescott, Edward C., “Why do Americans work so much more than Europeans?,” Federal Reserve Bank of Minneapolis Quarterly Review, 2004, (Jul), 2–13.

Pries, Michael and Richard Rogerson, “Hiring Policies, Labor Market Institutions, and Labor Market Flows,” Journal of Political Economy, August 2005, 113 (4), 811–839.

Rocheteau, Guillaume and Murat Tasci, “Positive and normative effects of a minimum wage,” Working Paper 0801, Federal Reserve Bank of Cleveland 2008.

Rogerson, Richard, “Understanding Differences in Hours Worked,” Review of Economic Dynamics, July 2006, 9 (3), 365–409.

Rogerson, Richard, “Structural Transformation and the Deterioration of European Labor Market Outcomes,” Journal of Political Economy, 04 2008, 116 (2), 235–259.

Rogerson, Richard and Johanna Wallenius, “Micro and Macro Elasticities in a Life Cycle Model with Taxes,” Journal of Economic Theory, 11 2009, 144 (6), 2277–2292.

Ruggles, Steven, Matthew Sobek, Trent Alexander, Catherine A. Fitch, Ronald Goeken, Patricia Kelly Hall, Miriam King, and Chad Ronnander, Integrated Public Use Microdata Series: Version 4.0 [Machine-readable database], Minneapolis, MN: Minnesota Population Center [producer and distributor], 2009.

Shimer, Robert, “Reassessing the Ins and Outs of Unemployment,” 2005. Manuscript, University of Chicago, June 21.

Wessels, Walter J., “Does the Minimum Wage Drive Teenagers Out of the Labor Force?,” Journal of Labor Research, January 2005, 26 (1), 169–176.