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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 dp0533.

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Date of creation: Jun 2002
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Handle: RePEc:cep:cepdps:dp0533

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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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  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!]
    Other versions:
  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!]
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  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!]
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  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!]
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  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!]
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  10. Mike Brewer, 2007. "Welfare reform in the UK: 1997 - 2007," IFS Working Papers W07/20, Institute for Fiscal Studies. [Downloadable!]
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  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 & Barbara 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!]
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  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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