Do Frictions Matter in the Labor Market? Accessions, Separations, and Minimum Wage Effects

We provide the first test of the effects of U.S. minimum wages on labor market flows (accession, separation and turnover rates). Using county pairs straddling borders with minimum wage differences, we find large negative effects on all three measures, but no disemployment effects on teens or restaurant workers. Separation and accessions among restaurant workers falls considerably among fast food establishments, among teens and young adults, and for jobs with less than one quarter tenure. The teen, young adult, and female compositions of the restaurant workforce do not change in response to minimum wage increases. Among all teen workers (including those not working in restaurants), we find similar patterns of lower turnover coupled with employment effects close to zero. We show that these results are consistent with a wage-posting model, under conditions containing a substantial extent of friction and a high market-level labor supply elasticity