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The Employment Effects of the October 2003 Increase in the National Minimum Wage

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  • Richard Dickens
  • Mirko Draca

Abstract

There is a growing body of research that measures employment effects of the minimum wage by using longitudinal data on individuals to compare job loss of workers affected by a minimum wage increase with those who are not directly affected. This sort of study requires good quality wage data in order to clearly identify these treatment and control groups. Much of the evidence on the impact of the UK minimum wage uses this technique with poor quality wage data. This paper examines the impact of the October 2003 increase in the National Minimum Wage (NMW) using a much better measure of the wage. We find insignificant negative effects on the employment retention rates of all adults and, most notably, male workers. Analysis of the probability of employment retention across different hourly wage rates also show how sensitive this methodology can be to different definitions of the treatment and control group.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0693.

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Date of creation: Jun 2005
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Handle: RePEc:cep:cepdps:dp0693

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Minimum Wages; Employment Transitions; Wages;

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  1. Mark B. Stewart, 2004. "The employment effects of the national minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages C110-C116, 03.
  2. Richard Dickens & Alan Manning, 2002. "Has The National Minimum Wage Reduced UK Wage Inequality?," CEP Discussion Papers dp0533, Centre for Economic Performance, LSE.
  3. Francis Kramarz & Thomas Philippon, 2000. "The Impact of Differenctial Payroll Tax Subsidies on Minimum Wage Employment," Working Papers 2000-10, Centre de Recherche en Economie et Statistique.
  4. Mark B. Stewart, 2002. "Estimating the Impact of the Minimum Wage Using Geographical Wage Variation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(s1), pages 583-605, 08.
  5. Machin, Stephen & Alan Manning & Lupin Rahman, 2003. "Where Minimum Wage Bites Hard: The Introduction of the UK National Minimum Wage to a Low Wage Sector," Royal Economic Society Annual Conference 2003 145, Royal Economic Society.
  6. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  7. Mark B. Stewart, 2004. "The Impact of the Introduction of the U.K. Minimum Wage on the Employment Probabilities of Low-Wage Workers," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 67-97, 03.
  8. Linneman, Peter, 1982. "The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 443-69, June.
  9. Dickens, Richard & Alan Manning, 2003. "The Impact of the National Minimum Wage on the Wage Distribution in a Low-Wage Sector," Royal Economic Society Annual Conference 2003 60, Royal Economic Society.
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