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Collusion at the Non-Binding Minimum Wage: An Automatic Stabilizer?

Author

Listed:
  • Natalya Y. Shelkova

    (Guilford College and University of Connecticut)

Abstract

This paper examines unemployment dynamics through the lens of a wage-posting model with two sectors and two types of workers. The model assumptions include collusion at a non-binding minimum wage, costly entry and intersectoral labor mobility. Model simulations demonstrate that collusion at a non-binding minimum wage induces entry into the low-wage sector. This dampens the overall negative employment impact of economic downturns. The excess of low-wage vacancies has shown not only to secure low unemployment rates for the low-skilled workers, but also to provide employment opportunities for the high-skilled when their industries substantially decline.

Suggested Citation

  • Natalya Y. Shelkova, 2009. "Collusion at the Non-Binding Minimum Wage: An Automatic Stabilizer?," Working papers 2009-41, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2009-41
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    References listed on IDEAS

    as
    1. Natalya Shelkova, 2015. "Low-Wage Labor Markets and the Power of Suggestion," Review of Social Economy, Taylor & Francis Journals, vol. 73(1), pages 61-88, March.
    2. James Albrecht & Gerard van den Berg & Susan Vroman, 2009. "The Aggregate Labor Market Effects of the Swedish Knowledge Lift Program," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 129-146, January.
    3. Bhaskar, V. & To, Ted, 2003. "Oligopsony and the distribution of wages," European Economic Review, Elsevier, vol. 47(2), pages 371-399, April.
    4. Steven J. Davis & R. Jason Faberman & John Haltiwanger & Ron Jarmin & Javier Miranda, 2010. "Business Volatility, Job Destruction, and Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 259-287, April.
    5. Shapiro, Joel, 2004. "Income taxation in a frictional labor market," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 465-479, March.
    6. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
    7. Albrecht, James & Tan, Serene & Gautier, Pieter & Vroman, Susan, 2004. "Matching with multiple applications revisited," Economics Letters, Elsevier, vol. 84(3), pages 311-314, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    unemployment; search; minimum wage; collusion;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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