Reservation Wages

Interesting new paper from Alan Krueger and Andreas Muller using surveys of unemployed workers.  Tyler Cowen passes on this popular summary (no source given):

… today’s job seekers seem more picky. According to an analysis of surveys of 6,000 job seekers, the minimum wages that the unemployed are willing to accept are very close to their previous salary and drop little over time, says Mr. Mueller. That could help explain in part why they have so much trouble finding work, he says. [emphasis added]

The paper gives evidence that the unemployed aren’t doing the things we might expect them to (or maybe we would?).  Namely, during an unemployment spell, time devoted to job search declines while the reservation wage doesn’t.  Which, according to the paper, is the exact opposite of what one needs to do to find employment, as “amount of time devoted to job search and the reservation wage help predict early exits from Unemployment Insurance”.


About brianbergfeld
I am an economics PhD student at Washington University in St. Louis.

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