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Has the national minimum wage reduced UK wage inequality?

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  • Richard Dickens
  • Alan Manning

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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File URL: http://eprints.lse.ac.uk/20079/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20079.

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Length: 25 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:ehl:lserod:20079

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Keywords: minimum wage; wage inequality;

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  1. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: a Semiparametric Approach," Cahiers de recherche 9406, Universite de Montreal, Departement de sciences economiques.
  2. Sue Fernie & Helen Gray, 2002. "It's a family affair: the effect of union recognition and human resource management on the provision of equal opportunities in the UK," LSE Research Online Documents on Economics 20089, London School of Economics and Political Science, LSE Library.
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