The minimum wage from a two-sided perspective

This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms’ job offer and workers’ job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that sufficiently low minimum wages may do no harm to employment, since their job-offer disincentives are countervailed by their job-acceptance incentives. •This paper shows that a minimum wage decreases the job offer rate and increases the job acceptance rate.•We show that due to these countervailing effects sufficiently low minimum wages may do no harm to employment.•By contrast, high minimum wages destroy jobs.