14 The Minimum Wage and Job Turnover in Markets for Young Workers

By the standard analysis, the minimum wage ought to create a shortage of jobs for young workers. The minimum sets a reward to work which draws the young into the labor market in numbers beyond the level of employ-ment which employers are willing to provide. With large numbers of job-hunters looking for a small number of actual jobs, jobs become exceedingly hard to find, according to this view. The excessive effort required for young workers to find jobs in such a market is one of the important social costs of the minimum wage and is starkly evident in high unemployment rates for the young. This analysis exhibits one important discrepancy from the actual experiences of American youths: in fact, jobs paying the minimum wage are quite easy to find. Millions of jobs are filled every year by a never-ending stream of youths. The young take no longer than mature workers to find jobs, even though they are clearly dif-ferentially influenced by the minimum wage. It is by now firmly estab-lished that high unemployment among youths is associated with high frequency of unemployment, not long duration of unemployment. To put it another way, the problem of jobs for the young is not that they are hard to find, but that they do not last very long. This chapter presents an alternative analysis of the effects of the minimum wage within a labor market where both job turnover and the availability of new jobs are determined through the interaction of the preferences of young workers, the costs of turnover and recruiting faced by employers, and the minimum wage set by the government. The essential hypothesis is that the arrangements observed in markets for th