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THE MINIMUM WAGE AND OCCUPATIONAL MOBILITY

Andrew Yizhou Liu

International Economic Review, 2022, vol. 63, issue 2, 917-945

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%.

Date: 2022
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International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

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