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The Dynamics of the National Minimum Wage: Transitions Between Different Labour Market States

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Author Info

  • Jones, Melanie K.

    ()
    (Swansea University)

  • Jones, Richard J.

    ()
    (Swansea University)

  • Murphy, Philip D.

    ()
    (Swansea University)

  • Sloane, Peter J.

    ()
    (Swansea University)

Abstract

An important policy issue is whether the National Minimum Wage (NMW) introduced in Britain in April 1999, is a stepping stone to higher wages or traps workers in a low-wage – no-wage cycle. In this paper we utilise the longitudinal element of the Labour Force Survey over the period 1999 to 2003 to model transitions between different labour market states – payment at or below the NMW, above the NMW, unemployment and inactivity, using a multinomial logit approach. It appears that for many workers payment at or below the NMW is of relatively short duration and a substantial number move into higher paid jobs.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1690.

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Length: 41 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1690

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Keywords: steady state distributions; transitions; national minimum wage;

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References

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  1. David Neumark & Olena Nizalova, 2007. "Minimum Wage Effects in the Longer Run," Journal of Human Resources, University of Wisconsin Press, vol. 42(2).
  2. Ransom, Michael R. & Oaxaca, Ronald L., 2003. "Intrafirm Mobility and Sex Differences in Pay," IZA Discussion Papers 704, Institute for the Study of Labor (IZA).
  3. Arulampalam, Wiji & Booth, Alison L. & Bryan, Mark L., 2002. "Work-Related Training and the New National Minimum Wage in Britain," IZA Discussion Papers 595, Institute for the Study of Labor (IZA).
  4. Jonathan Wadsworth, 2009. "Minimum Wages," The Economic Record, The Economic Society of Australia, vol. 85(271), pages 491-492, December.
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Cited by:
  1. Arne Uhlendorff, 2006. "From No Pay to Low Pay and Back Again?: A Multi-State Model of Low Pay Dynamics," Discussion Papers of DIW Berlin 648, DIW Berlin, German Institute for Economic Research.
  2. Agne Lauzadyte, 2007. "A Statistical Programme Assignment Model," Economics Working Papers 2007-18, School of Economics and Management, University of Aarhus.

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