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Has The National Minimum Wage Reduced UK Wage Inequality?


  • Richard Dickens
  • Alan Manning


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.

Suggested Citation

  • Richard Dickens & Alan Manning, 2002. "Has The National Minimum Wage Reduced UK Wage Inequality?," CEP Discussion Papers dp0533, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0533

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    References listed on IDEAS

    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    2. Sue Fernie & Helen Gray, 2002. "Its a Family Affair: the Effect of Union Recognition and Human Resource Management on the Provision of Equal Opportunities in the UK," CEP Discussion Papers dp0525, Centre for Economic Performance, LSE.
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    More about this item


    minimum wage; wage inequality;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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