Minimum Wage Shocks, Employment Flows and Labor Market Frictions

We provide the first estimates of the effects of minimum wages on employment flows in the U.S. labor market, identifying the impact using policy discontinuities at state borders. We find that minimum wages have a sizable negative effect on employment flows but not stocks: separations and accessions fall among affected workers. We interpret our findings using a job-ladder model, in which minimum wage increases can reduce job-to-job transitions. We find that a standard calibration of the model generates predicted relative magnitudes of the employment stock and flow elasticities that are very close to our reduced-form estimates.