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Where the Minimum Wage Bites Hard: Introduction of Minimum Wages to a Low Wage Sector

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Author Info
Stephen Machin (University College London and London School of Economics,)
Alan Manning (London School of Economics)
Lupin Rahman (London School of Economics,)

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Abstract

Between 1993 and April 1999 there was no minimum wage in the United Kingdom (except in agriculture). In this paper we study the effects of the introduction of a National Minimum Wage (NMW) in April 1999 on one heavily affected sector, the residential care homes industry. This sector contains a large number of low paid workers and as such can be viewed as being very vulnerable to minimum wage legislation. We look at the impact on both wages and employment. Our results suggest that the minimum wage raised the wages of a large number of care home workers, causing a very big wage compression of the lower end of the wage distribution, thereby strongly reducing wage inequality. There is some evidence of employment and hours reductions after the minimum wage introduction, though the estimated effects are not that sizable given how heavily the wage structure was affected. (JEL: J4, J8) Copyright (c) 2003 The European Economic Association.

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Publisher Info
Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 1 (2003)
Issue (Month): 1 (03)
Pages: 154-180
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Handle: RePEc:tpr:jeurec:v:1:y:2003:i:1:p:154-180

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  1. Natalya Y. Shelkova, 2008. "Low-Wage Labor Markets and the Power of Suggestion," Working papers 2008-33, University of Connecticut, Department of Economics, revised Dec 2008. [Downloadable!]
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  2. Lemos, Sara, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," IZA Discussion Papers 1089, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Sara Lemos, 2005. "How Do Alternative Minimum Wage Variables Compare?," Discussion Papers in Economics 05/6, Department of Economics, University of Leicester. [Downloadable!]
  4. Sara Lemos, 2004. "Minimum Wage Effects Across The Private And Public Sectors In Brazil," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 155, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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  5. Lemos, Sara, 2004. "The Effect of the Minimum Wage on Prices in Brazil," IZA Discussion Papers 1071, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Sara lemos, 2004. "The Effect of the Minimum Wage on Prices," Discussion Papers in Economics 04/7, Department of Economics, University of Leicester. [Downloadable!]
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  7. Lemos, Sara, 2004. "Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?," IZA Discussion Papers 1070, Institute for the Study of Labor (IZA). [Downloadable!]
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  8. Andreas P. Georgiadis, 2006. "Is the Minimum Wage Efficient? Evidence of the Effects of the UK National Minimum Wage in the Residential Care Homes Sector," The Centre for Market and Public Organisation 06/160, Department of Economics, University of Bristol, UK. [Downloadable!]
  9. Sara Lemos, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," Discussion Papers in Economics 04/3, Department of Economics, University of Leicester. [Downloadable!]
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  10. Sara Lemos, 2006. "A Survey of the Effects of the Minimum Wage on Prices," Discussion Papers in Economics 06/9, Department of Economics, University of Leicester. [Downloadable!]
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  11. Sara Lemos, 2006. "Anticipated effects of the minimum wage on prices," Applied Economics, Taylor and Francis Journals, vol. 38(3), pages 325-337, February. [Downloadable!] (restricted)
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  12. repec:bep:eapcon:v:4:y:2005:i:1:p:1425-1425 is not listed on IDEAS
  13. Arnab K. Basu & Nancy H. Chau & Ravi Kanbur, 2007. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," IZA Discussion Papers 2998, Institute for the Study of Labor (IZA). [Downloadable!]
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  14. Sara Lemos, 2006. "Minimum Wage Effects in a Developing Country," Discussion Papers in Economics 06/1, Department of Economics, University of Leicester. [Downloadable!]
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