Employment and distribution effects of the minimum wage

► We model an economy with high- and low-tech jobs, and high- and low-skill workers. ► Over-education (high-skill workers in low-tech jobs) can be generated endogenously. ► An increase in the minimum wage can raise both total and low-skill employment. ► Evidence from the US suggests these theoretica...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2012-09, Vol.84 (1), p.245-264
Main Authors: Slonimczyk, Fabián, Skott, Peter
Format: Article
Language:English
Subjects:
Earnings inequality
Education
Efficiency wage
Efficiency wages
Employment
Evidence
Falls
Income inequality
Inequalities
Labor economics
Minimum wage
Minimum wages
Monopsony
Over-education
Relative wages
Studies
U.S.A
Wage differential
Wages
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Summary:► We model an economy with high- and low-tech jobs, and high- and low-skill workers. ► Over-education (high-skill workers in low-tech jobs) can be generated endogenously. ► An increase in the minimum wage can raise both total and low-skill employment. ► Evidence from the US suggests these theoretical results are empirically relevant. This paper analyzes the effects of the minimum wage on wage inequality, relative employment and over-education. We show that over-education can be generated endogenously and that an increase in the minimum wage can raise both total and low-skill employment, and produce a fall in inequality. Evidence from the US suggests that these theoretical results are empirically relevant. The over-education rate has been increasing and our regression analysis suggests that the decrease in the minimum wage may have led to a deterioration of the employment and relative wage of low-skill workers.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2012.03.005