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Has The National Minimum Wage Reduced UK Wage Inequality?

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Author Info
Richard Dickens
Alan Manning

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Abstract

This paper investigates the impact on the wage distribution of the introduction, in April 1999, of the National Minimum Wage in the UK. Because of the structure of UK earnings statistics, it is not straightforward to investigate this and a number of different methods for adjusting the published statistics are discussed. The main conclusions are that the NMW does have a detectable effect on the wage distribution and that compliance with the NMW is widespread but the impact is limited because the NMW has been set at a level such that only 6-7% of workers are directly affected and the NMW has had virtually no impact on the pay of workers not directly affected. Furthermore, virtually all the changes occurred within two months of the introduction in April 1999 and its impact declined over time from April 1999 to May 2001 as the minimum wage was not up-rated in line with the increase in average earnings.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number 0533.

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Date of creation: Jun 2002
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Handle: RePEc:cep:cepdps:0533

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Related research
Keywords: minimum wage wage inequality

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alex Bryson & Rafael Gomez & Morley Gunderson & Noah Meltz, 2002. "Youth-Adult Differences in the Demand for Unionisation: Are American, British, and Canadian Workers All That Different?," CEP Discussion Papers 0515, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  2. Overman, Henry G. & Redding, Stephen J & Venables, Anthony J., 2001. "The Economic Geography of Trade Production and Income: A Survey of Empirics," CEPR Discussion Papers 2978, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Dale T. Mortensen & Christopher A. Pissarides, 2002. "Taxes, Subsidies and Equilibrium Labor Market Outcomes," CEP Discussion Papers 0519, Centre for Economic Performance, LSE. [Downloadable!]
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  4. Crafts, Nicholas & Venables, Anthony J., 2001. "Globalization in History: A Geographical Perspective," CEPR Discussion Papers 3079, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "Minimum Wages and On-the-job Training," NBER Working Papers 7184, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Gilles Duranton & Diego Puga, 2001. "From sectoral to functional urban specialisation," Working Papers dpuga-01-01, University of Toronto, Department of Economics. [Downloadable!]
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  7. Rafael Gomez & Morley Gunderson & Noah Meltz, 2001. "From ‘Playstations’ to ‘Workstations’: Youth Preferences for Unionisation in Canada," CEP Discussion Papers 0512, Centre for Economic Performance, LSE. [Downloadable!]
  8. Pierre-Philippe Combes & Gilles Duranton, 2001. "Labor Pooling, Labor Poaching and Spatial Clustering," CEP Discussion Papers 0510, Centre for Economic Performance, LSE. [Downloadable!]
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  9. Rachel Griffith & Stephen Redding & John Van Reenen, 2001. "Measuring the Cost Effectiveness of an R&D Tax Credit for the UK," CEP Discussion Papers 0509, Centre for Economic Performance, LSE. [Downloadable!]
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  10. Stephen Machin & Alan Manning, 2002. "The Structure of Wages in What Should be a Competitive Labour Market," CEP Discussion Papers 0532, Centre for Economic Performance, LSE. [Downloadable!]
  11. Arnaud Chevalier & Reamonn Lydon, 2002. "Estimates of the Effect of Wages on Job Satisfaction," CEP Discussion Papers 0531, Centre for Economic Performance, LSE. [Downloadable!]
  12. Arnaud Chevalier & Tarja K. Viitanen & Tarja K. Viitanen, 2003. "The long-run labour market consequences of teenage motherhood in Britain," Journal of Population Economics, Springer, vol. 16(2), pages 323-343, 05. [Downloadable!] (restricted)
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  13. Dearden, Lorraine & Machin, Stephen & Reed, Howard, 1997. "Intergenerational Mobility in Britain," Economic Journal, Royal Economic Society, vol. 107(440), pages 47-66, January. [Downloadable!] (restricted)
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  14. Ellen E. Meade & D. Nathan Sheets, 2002. "Regional Influences on U.S. Monetary Policy: Some Implications for Europe," CEP Discussion Papers 0523, Centre for Economic Performance, LSE. [Downloadable!]
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  15. Richard Dickens & David T. Ellwood, 2001. "Whither Poverty in Great Britain and the United States? The Determinants of Changing Poverty and Whether Work Will Work," NBER Working Papers 8253, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. M Manacorda & Enrico Moretti, 2002. "Intergenerational Transfers and Household Structure. Why Do Most Italian Youths Live With Their Parents?," CEP Discussion Papers 0536, Centre for Economic Performance, LSE. [Downloadable!]
  2. Andrew Leigh, 2005. "Optimal Design of Earned Income Tax Credits: Evidence from a British Natural Experiment," CEPR Discussion Papers 488, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  3. Mirko Draca & Stephen Machin & John Van Reenen, 2006. "Minimum Wages and Firm Profitability," CEP Discussion Papers dp0715, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  4. Gabriele Beissel-Durrant & Chris Skinner, 2003. "Estimation of the Distribution of Hourly Pay from Household Survey Data: The Use of Missing Data Methods to Handle Measurement Error," CeMMAP working papers CWP12/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
  5. Helen Robinson & Jonathan Wadsworth, 2006. "The Impact of the Minimum Wage on the Incidence of Second Job Holding in Britain," IZA Discussion Papers 2445, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Richard Dickens & Mirko Draca, 2005. "The Employment Effects of the October 2003 Increase in the National Minimum Wage," CEP Discussion Papers dp0693, Centre for Economic Performance, LSE. [Downloadable!]
  7. Stewart, Mark B. & Swaffield, Joanna K., 2006. "The other margin : do minimum wages cause working hours adjustments for low-wage workers?," The Warwick Economics Research Paper Series (TWERPS) 746, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  8. Helen Robinson, 2005. "Regional evidence on the effect of the national minimum wage on the gender pay gap," Regional Studies, Taylor and Francis Journals, vol. 39(7), pages 855-872, October. [Downloadable!] (restricted)
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  9. Stephen Nickell, 2003. "Poverty and Worklessness in Britain," CEP Discussion Papers dp0579, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  10. Mike Brewer, 2007. "Welfare reform in the UK: 1997 - 2007," IFS Working Papers W07/20, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  11. Francesconi, Marco & van der Klaauw, Wilbert, 2004. "The Consequences of ‘In-Work’ Benefit Reform in Britain: New Evidence from Panel Data," IZA Discussion Papers 1248, Institute for the Study of Labor (IZA). [Downloadable!]
  12. 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!]
  13. Alan Manning & B Petrongolo, 2005. "The Part-Time Pay Penalty," CEP Discussion Papers dp0679, Centre for Economic Performance, LSE. [Downloadable!]
  14. repec:ese:iserwp: is not listed on IDEAS
  15. Richard Blundell & Mike Brewer & Marco Francesconi, 2007. "Job Changes and Hours Changes: Understanding the Path of Labour Supply Adjustment," IZA Discussion Papers 3044, Institute for the Study of Labor (IZA). [Downloadable!]
  16. Alex Bryson & P Willman, 2007. "Union Organization in Great Britain," CEP Discussion Papers dp0774, Centre for Economic Performance, LSE. [Downloadable!]
  17. Ghazala Azmat, 2006. "The Impact of Tax Credits on Labour Supply," Economics Working Papers 979, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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