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Do minimum wages increase search effort?

Author

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  • Laws, A.
Abstract
Minimum wages often generate a perplexing set of empirical impacts, including little to no employment consequences but large wage consequences. This paper tests arguably the most promising explanation - search models of minimum wages - in a more direct manner than has been possible to date. The analysis combines extensive data on UK workers' search behaviour with quasi-experimental analysis of the UK minimum wage policy structure, including the 2016 introduction of the National Living Wage. I find robust evidence of increased labour force participation and extensive margin search in response to higher minimum wages with no corresponding change in employment rates. Evidence of decreased average search intensity is uncovered and the duration of unemployed search increases. Taken together, the unemployed search results suggest that minimum wages do impact on labour flow frictions in important ways. In contrast, no significant estimates are found for any on-the-job search moments, i.e. I find no evidence for potential concerns that higher minimum wages provide a disincentive for workers to progress up job ladders.

Suggested Citation

  • Laws, A., 2018. "Do minimum wages increase search effort?," Cambridge Working Papers in Economics 1857, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1857
    Note: ahl28
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1857.pdf
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    References listed on IDEAS

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    Cited by:

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    3. Doruk Cengiz & Arindrajit Dube & Attila S. Lindner & David Zentler-Munro, 2021. "Seeing Beyond the Trees: Using Machine Learning to Estimate the Impact of Minimum Wages on Labor Market Outcomes," NBER Working Papers 28399, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Equilibrium search models; Minimum wages; Quasi-experimental analysis;
    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
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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