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Minimum wage and tolerance for high incomes

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Abstract

We suggest that stabilizing the baseline income can make low-wage workers more tolerant towards high income earners. We present evidence of this attitude in the UK by exploiting the introduction of the National Minimum Wage (NMW), which institutionally sets a baseline pay reducing the risk of income losses and providing a clear reference point for British workers at the lower end of the income distribution. Based on data from the British Household Panel Survey (BHPS), we show that workers who benefited from the NMW program became relatively more tolerant of high incomes and more likely to support and vote for the Conservative Party. As far as tolerance for high incomes is related to tolerance of inequality, our results suggest that people advocate for equality also because they fear income losses below a given reference point.

Suggested Citation

  • Fazio, Andrea & Reggiani, Tommaso, 2023. "Minimum wage and tolerance for high incomes," Cardiff Economics Working Papers E2023/14, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2023/14
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    Cited by:

    1. Paul Clarke & Annalivia Polselli, 2023. "Double Machine Learning for Static Panel Models with Fixed Effects," Papers 2312.08174, arXiv.org, revised Dec 2023.

    More about this item

    Keywords

    Inequality; Redistribution; Minimum wage; Loss aversion; Reference Point; UK;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • Z1 - Other Special Topics - - Cultural Economics

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