The Minimum Wage and Occupational Mobility

Abstract

This article quantifies the effect of minimum wages on workers' occupational mobility. I show that minimum wages decrease younger, less‐educated workers' occupational mobility and are associated with more mismatch. A search‐and‐matching model highlights two channels by which the minimum wage decreases occupational mobility. First, it compresses wages and reduces the gain from switching, leading to lower occupational mobility and more mismatch. Second, it decreases vacancy posting. Calibrating the model to the U.S. economy, the results suggest that a 15 dollar minimum wage can damp aggregate output by 0.4%, of which the wage compression channel accounts for 80%.

How important are minimum wage increases in increasing the wages of minimum wage workers?

“…WhileClemens and Strain (2021) find negative effects for low-skilled worker groups, evidence fromJardim et al (2022) andGopalan et al (2021) finds that reductions in hours and employment occurred primarily due to decreases in hiring rather than increases in layoffs. This is consistent with the current paper's analysis finding no evidence that minimum wage increases predict increases in transitions out of employment.5 The effective minimum wage rate is the larger of the federal minimum wage rate and the applicable state minimum wage rate.6 Recent work byLiu (2022aLiu ( , 2022b has investigated the effects of minimum wage increases on the probability that workers change jobs.Liu (2022a) finds that minimum wage increases reduce the occupational mobility of young and less educated workers, which can have implications for their future wage growth Liu (2022b). finds that relatively large minimum wage increase, in particular, have a substantial negative impact on upward occupational mobility.7 These facts can also be connected to empirical research on the long-run effects graduating during a recession, which limits the range of opportunities a worker can quickly explore(Kahn, 2010;Oreopoulos et al, 2012).…”

“…6 6 Recent work by Liu (2022a, 2022b) has investigated the effects of minimum wage increases on the probability that workers change jobs. Liu (2022a) finds that minimum wage increases reduce the occupational mobility of young and less educated workers, which can have implications for their future wage growth. Liu (2022b) finds that relatively large minimum wage increase, in particular, have a substantial negative impact on upward occupational mobility. …”

“…Recent work by Liu (2022a, 2022b) has investigated the effects of minimum wage increases on the probability that workers change jobs. Liu (2022a) finds that minimum wage increases reduce the occupational mobility of young and less educated workers, which can have implications for their future wage growth. Liu (2022b) finds that relatively large minimum wage increase, in particular, have a substantial negative impact on upward occupational mobility.…”

The impact of corporate digital transformation on the export product quality: Evidence from Chinese enterprises

“…This paper selects a series of control variables that can impact the export product quality of an enterprise with reference to relevant studies [1,38,[59][60][61]: enterprise scale (lnes), described by the natural logarithm of the firm's total annual assets; the rate of return on total assets (rrt),represented by the net profit of the firm divided by the average balance of total assets; management fee rate (mfr), measured by dividing the firm's management fee by its operating revenue measures; Tobin's Q (tq), which measures a firm's performance and growth by dividing the sum of the firm's total market value and total liabilities by its total assets; and government subsidies (lngs), which in this paper is represented by the amount of government subsidies received by an enterprise. The descriptive statistics of specific variables are shown in Table 2.…”

Minimum wage spillover effects and social welfare in a model of stochastic job matching

“…Gorry (2013) evaluates the effects of minimum wages on the pattern of unemployment over the life-cycle in a search and matching model with experience accumulation; he shows that high minimum wages have a pronounced disemployment effect on young/inexperienced workers, who are unable to accumulate job experience and face worse labor market outcomes later in their working lives. In a search and matching model with heterogeneous occupations and workers, Liu (2022) demonstrates that minimum wages reduce the occupational mobility of young/low-ability workers and increase job mismatch. My work contributes to the literature by adopting a normative approach: I solve the problem of a social planner setting a minimum wage in a labor market with search frictions.…”