Minimum wages and youth unemployment

Shutterstock.com

Abstract
This paper constructs a labor search model to explore the eff ects of minimum wages on youth unemployment. To capture the gradual decline in unemployment for young workers as they age, the standard search model is extended so that workers gain experience when employed. Experienced workers have higher average productivity and lower job finding and separation rates that match wage and worker flow data. In this environment, minimum wages can have large eff ects on unemployment because they interact with a worker's ability to gain job experience. The increase in minimum wages between 2007 and 2009 can account for a 0.8 percentage point increase in the steady state unemployment rate and a 2.8 percentage point increase in unemployment for 15-24 year old workers in the model parameterized to simulate outcomes of high school educated workers. Minimum wages can also help explain the high rates of youth unemployment in France compared to the United States. 

Gorry: Minimum wages and youth unemployment

Download PDF

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Aspen
Gorry

What's new on AEI

With Ukraine, Putin is courting the home crowd
image Ayn Rand vs. Paul Ryan
image Fighting for us: The real stakes in Israel’s war
image Obama failed to stop the Islamic State when he had the chance
AEI on Facebook
Events Calendar
  • 28
    MON
  • 29
    TUE
  • 30
    WED
  • 31
    THU
  • 01
    FRI
Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

Friday, August 01, 2014 | 10:30 a.m. – 12:00 p.m.
Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.