The Impact of Minimum Wages on Labour Market Transitions


  • We would like to thank Paul Beaudry, David Gray, John Kennan, Louis-Philippe Morin, Chris Taber and Jeff Smith, and participants at the conference in honour of Charles Beach at Queen's University, the 2012 CLSRN conference and at the Institute for Research on Poverty Summer Workshop, June 2012, for their comments and suggestions.


We investigate differences in labour market transition rates between high and low minimum wage regimes using Canadian data spanning 1979–2008. We find that higher minimum wages result in lower hiring rates but also lower job separation rates. Importantly, the reduced separation rates are due mainly to reductions in layoffs, occur in the first six months of a job and are present for unskilled workers of all ages. Thus, jobs in higher minimum wage regimes are more stable but harder to get. For older workers, these effects are almost exactly offsetting, resulting in little impact on the employment rate.