JSM 2005 - Toronto

Abstract #304143

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Activity Number: 488
Type: Contributed
Date/Time: Thursday, August 11, 2005 : 8:30 AM to 10:20 AM
Sponsor: Business and Economics Statistics Section
Abstract - #304143
Title: On-the-job Search and the Minimum Wage
Author(s): Anne Polivka*+ and Rosemary Hyson
Companies: Bureau of Labor Statistics and CUNY Research Foundation and Baruch School of Public Affairs
Address: 1005 Jennifer Lane, Falls Church, VA, 22046, United States
Keywords: State Mandated Minimum Wages ; Wage Distributions ; Predictors of Search
Abstract:

From 1997--2004, the federal minimum wage remained constant, but by 2002, 12 states had a minimum wage above the federal minimum and nine of these had increased their minimum wage at least twice. Increases in the minimum wage may decrease the probability of workers engaging in on-the-job search. This decrease could occur because a higher minimum wage may reduce the expected pay-off from finding alternative employment and because a higher minimum wage may raise workers' current wages above their on-the-job search reservation wage. This paper examines the effect of the minimum wage on the propensity of low-wage workers to engage in on-the-job search by exploiting cross-sectional differences in states' minimum wages and time-series variation within states. We also compare profiles of low-wage workers before and after an increase in states' minimum wage to gauge differences in the type of workers in the lower tail of the wage distribution following the increase. In addition to expanding our knowledge about the minimum wage, this research also contributes to our understanding of the interactions between on-the-job search and the wage distribution.

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Revised March 2005