Minimum wage increase can reduce unemployment and improve worker welfare.
The article explores how wage competition between workers and firms affects job applications and unemployment. The study shows that when workers apply for only one job, there is no wage variation and unemployment. However, when workers apply for multiple jobs, wage differences and unemployment typically occur. A higher job vacancy rate leads to higher wages. Increasing the minimum wage can be beneficial by reducing wage differences and congestion from too many job applications. To achieve efficiency, a mandatory wage without wage variation is necessary.