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The Effects of Minimum Wages on Employment: Theory and Evidence from Britain

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  • Dickens, Richard
  • Machin, Stephen
  • Manning, Alan

Abstract

Recent work on the economic effects of minimum wages has stressed that the standard economic model, where increases in minimum wages depress employment, is not supported by empirical work in some labor markets. The authors present a general theoretical model whereby employers have some degree of monopsony power, which allows minimum wages to have the conventional negative impact on employment but which also allows for a neutral or positive impact. Studying the industry-based British Wages Councils between 1975 and 1992, they find that minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment. Copyright 1999 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 17 (1999)
Issue (Month): 1 (January)
Pages: 1-22

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Handle: RePEc:ucp:jlabec:v:17:y:1999:i:1:p:1-22

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  1. Richard Dickens & Alan Manning, 1995. "After Wages Councils," New Economy, Institute for Public Policy Research, vol. 2(4), pages 223-227, December.
  2. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  3. Kaufman, Roger T, 1989. "The Effects of Statutory Minimum Rates of Pay on Employment in Great Britain," Economic Journal, Royal Economic Society, vol. 99(398), pages 1040-53, December.
  4. Jonathan Wadsworth, 2009. "Minimum Wages," The Economic Record, The Economic Society of Australia, vol. 85(271), pages 491-492, December.
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  1. Economic fundamentalism and the minimum wage
    by kathy in Crooked Timber on 2008-05-11 18:19:01
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