Publication

This paper analyzes the influence of minimum wages on firms' incentives to train their employees. The authors show that this influence rests on two countervailing effects: Minimum wages (i) augment wage compression and thereby raise firms' incentives to train and (ii) reduce the profitability of employees, raise the firing rate and thereby reduce training. They conclude that minimum wages give rise to skills inequality: a rise in the minimum wage leads to less training for low-ability workers and more training for those of higher ability.