We assess the effect of the minimum wage on labor market outcomes. First, we apply modern machine learning tools to predict who is affected by the policy. Second, we implement an event study using 172 prominent minimum wage increases between 1979 and 2019. We find a clear increase in wages of affected workers and no change in employment. Furthermore, minimum wage increases have no effect on the unemployment rate, labor force participation, or labor market transitions. Overall, these findings provide little evidence of changing search effort in response to a minimum wage increase.

The impact of the pandemic on the UK labour market has been extremely heterogeneous across occupations and industries. Using novel data on job search, we document how individuals adjust their job search in response to changing employment patterns across occupations and industries in the UK. We observe that workers changed their search direction in favour of expanding occupations and industries as the pandemic developed. However, non-employed workers are more attached to their previous occupations and workers with low education are more likely to target declining occupations. We also observe workers from declining occupations making fewer transitions to expanding occupations than those who start in expanding occupations, despite targeting these jobs relatively frequently. This suggests those at the margins of the labour market may be least able to escape occupations that declined during the pandemic.

We use a simple yet powerful approach to investigate the dynamics of worker flows across sectors in the Spanish economy. The method imposes a minimal amount of structure on the data by assuming sector-specific matching functions, and backs out the direction of workers’ search intensities across sectors using data on realised worker flows and vacancies. We find that aggregate search intensity in Spain has been increasing since the pandemic and has led aggregate labour shortages to be below pre-pandemic levels by 2023. However, this boost of search intensity is directed to industries with low matching efficiencies and job finding rates. As a result, aggregate match formation is near to a 10-years low relative to the number of matches that would result if search intensity was allocated to maximise total matches given the observed vacancy distribution and match efficiencies across sectors.

Revise and Resubmit, Industrial Relations

This paper examines whether labor market frictions can explain the level and growth of the college wage premium in the US. I develop a novel model where both capital skill complementarity and differences in the search frictions faced by college and non-college workers drive the college wage premium. The presence of search frictions, and hence monopsonistic power, provides a range of explanations for rising college premiums not present in competitive models i.e. changes to relative job offer rates, to firm heterogeneity or to bargaining power between education groups. College workers enjoy substantially lower job destruction rates and higher job offer rates than non-college workers, which generates the presence of a significant, and relatively stable, college wage premium in my model. I also find that bargaining strength, as captured by unionization rates, starts off at similar levels for college and non-college workers but declines more severely for non-college workers. This trend explains a substantial portion of the growth in the college wage premium in my baseline model.

This paper examines the impact of minimum wages when search frictions are present and firms can substitute away from low skilled workers to both higher skilled workers and to capital. This represents a contribution to the search literature, which typically assumes labour is the only input of production and perfect substitution between labour inputs. I examine whether the model I develop features significant nonlinearities in the impact of the minimum wage on unemployment. I find that the theoretical contribution of this paper, i.e. allowing for search frictions and imperfect substitutability of factor inputs, is quantitatively significant. Specifically, the nonlinear unemployment response in my model is much less pronounced if I use the typical assumptions of the search literature, which imply a considerably more linear response of unemployment to the minimum wage.

I find that the workers' ability to self-insure via asset accumulation has an important role in determining the response of consumption inequality to minimum wage increases. Workers increase their savings to self-insure against the increased unemployment risk of higher minimum wage levels. This means that in my baseline model minimum wages achieve reductions in consumption inequality even when set at relatively high levels that cause unemployment to rise. In a model without savings, increasing the minimum wage level to such levels would increase consumption inequality because increased unemployment risk has a more significant pass-through to consumption inequality.

We develop a data-led structural framework for 1) measuring how workers direct their search effort towards different industries or occupations, and 2) providing measures of market tightness by industry and occupation. The novelty is to use realised worker flows to infer worker search effort and direction, when combined with vacancy data through the lens of a model of sector-specific matching functions.