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Did the National Minimum Wage Affect UK Prices?

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  • Wadsworth, Jonathan

    ()
    (Royal Holloway, University of London)

Abstract

One potential channel through which the effects of the minimum wage could be directed is that firms who employ minimum wage workers could pass on any resulting higher labour costs in the form of higher prices. This study looks at the effects of the introduction and subsequent uprating of the minimum wage on the prices of UK goods and services, comparing the prices of goods produced by industries in which UK minimum wage workers make up a substantial share of total costs with the prices of goods and services that make less use of minimum wage labour. Using sectoral-level price data matched to survey data on the share of minimum wage workers in each sector, it is hard to find much evidence of significant price changes in the months that correspond to the uprating of the NMW. However over the longer term, prices in several minimum wage sectors – notably take-away foods, canteen meals, hotel services and domestic services – do appear to have risen significantly faster than prices of non-minimum wage sectors. These effects were particularly significant in the four years immediately after the introduction of the minimum wage.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4433.

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Length: 65 pages
Date of creation: Sep 2009
Date of revision:
Publication status: published in: Fiscal Studies, 2010, 31 (1), 81-120
Handle: RePEc:iza:izadps:dp4433

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Keywords: minimum wage; prices;

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References

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Cited by:
  1. Nicholas Oulton & Ana Rincon-Aznar, 2009. "Rates of Return and Alternative Measures of Capital Input: 14 Countries and 10 Branches, 1971-2005," CEP Discussion Papers dp0957, Centre for Economic Performance, LSE.
  2. Urban Sila, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics 28684, London School of Economics and Political Science, LSE Library.

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