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Why Has the British National Minimum Wage Had Little or No Impact on Employment?

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  • David Metcalf
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    Abstract

    A century has passed since the first call for a British national minimum wage (NMW). That remarkable Fabian tract discussed wage setting, coverage, monopsony, international labour standards, inspection and compliance and the interaction between the NMW and the social security system. The NMW was finally introduced in 1999. It has raised the real and relative pay of low wage workers, narrowed the gender pay gap and now covers around 1-worker-in-10. The consequences for employment have been extensively analysed using information on individuals, areas and firms. There is little or no evidence of any employment effects. The reasons for this include: an impact on hours rather than workers; employer wage setting and labour market frictions; offsets via the tax credit system; incomplete compliance; improvements in productivity; an increase in the relative price of minimum wage-produced consumer services; and a reduction in the relative profits of firms employing low paid workers.

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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0781.

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    Date of creation: Apr 2007
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    Handle: RePEc:cep:cepdps:dp0781

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

    Related research

    Keywords: national minimum wage; employment; compliance;

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    Cited by:
    1. David G. Blanchflower & Chris Shadforth, 2007. "Fear, Unemployment and Migration," NBER Working Papers 13506, National Bureau of Economic Research, Inc.
    2. König, Marion & Möller, Joachim, 2007. "Mindestlohneffekte des Entsendegesetzes? : eine Mikrodatenanalyse für die deutsche Bauwirtschaft (Minimum wage effects of the worker posting law? : a micro data analysis for the German construction s," IAB Discussion Paper 200730, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Schmid, Günther, 2007. "Transitional labour markets: managing social risks over the lifecourse," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2007-111, Social Science Research Center Berlin (WZB).
    4. repec:hal:wpaper:halshs-00567693 is not listed on IDEAS
    5. Manfred J.M. Neumann, 2008. "Flächendeckender Mindestlohn: Ordnungspolitischer Sündenfall par excellence," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(06), pages 16-18, 03.
    6. Jürgen Kromphardt, 2008. "Eine Gegen-Anmerkung zur Reallohnentwicklung in Deutschland," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(02), pages 20, 01.
    7. repec:ebl:ecbull:v:30:y:2010:i:1:p:374-382 is not listed on IDEAS
    8. Bert Rürup, 2008. "Für einen moderaten allgemeinen Mindestlohn," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(06), pages 05-07, 03.
    9. Joachim Möller & Marion König, 2008. "Ein Plädoyer für Mindestlöhne mit Augenmaß," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(06), pages 13-16, 03.
    10. Schmid, Günther & Modrack, Simone, 2008. "Employment dynamics in Germany: lessons to be learned from the Hartz reforms," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2008-102, Social Science Research Center Berlin (WZB).
    11. Marcus Dittrich, 2010. "Minimum Wages and Unemployment Benefits in a Unionized Economy: A Game-Theoretic Approach," Annals of Economics and Finance, Society for AEF, vol. 11(2), pages 209-229, November.
    12. Philippe Askenazy & Eve Caroli & Jérôme Gautié, 2009. "Un panorama des bas salaires et de la qualité de l'emploi peu qualifié en France," PSE Working Papers halshs-00567693, HAL.

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