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

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  • David Metcalf

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.

Suggested Citation

  • David Metcalf, 2007. "Why Has the British National Minimum Wage Had Little or No Impact on Employment?," CEP Discussion Papers dp0781, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0781
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    File URL: http://cep.lse.ac.uk/pubs/download/dp0781.pdf
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    Cited by:

    1. 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 se," IAB Discussion Paper 200730, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Andrea Werner & Ming Lim, 2016. "The Ethics of the Living Wage: A Review and Research Agenda," Journal of Business Ethics, Springer, vol. 137(3), pages 433-447, September.
    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, WZB Berlin Social Science Center.
    4. Joachim Möller & Marion König, 2008. "Ein Plädoyer für Mindestlöhne mit Augenmaß," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 61(06), pages 13-16, March.
    5. 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.
    6. 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.
    7. Pantea, Smaranda, 2017. "Did minimum wage increases reduce employment? Panel data evidence from Romania," MPRA Paper 79863, University Library of Munich, Germany.
    8. repec:ebl:ecbull:v:30:y:2010:i:1:p:374-382 is not listed on IDEAS
    9. Alan Manning, 2013. "Minimum Wages: A View from the UK," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 14(1-2), pages 57-66, February.
    10. Bozena Kaderabkova & Emilie Jasova, 2016. "Character And Intensity Of The Minimum Wage Influence On Unemployment In The Czech Republic And Slovakia," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(1), pages 37-49, March.
    11. Manfred J.M. Neumann, 2008. "Flächendeckender Mindestlohn: Ordnungspolitischer Sündenfall par excellence," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 61(06), pages 16-18, March.
    12. repec:hal:cesptp:halshs-00567693 is not listed on IDEAS
    13. 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, WZB Berlin Social Science Center.
    14. repec:ces:ifosdt:v:61:y:2008:i:02:p:20-20 is not listed on IDEAS
    15. DavidG. Blanchflower & Chris Shadforth, 2009. "Fear, Unemployment and Migration," Economic Journal, Royal Economic Society, vol. 119(535), pages 136-182, February.
    16. Paulina Broniatowska & Aleksandra Majchrowska & Zbigniew ¯ó³kiewski, 2015. "Does minimum wage reduce youth employment on regional labour markets in Poland?," Lodz Economics Working Papers 1/2015, University of Lodz, Faculty of Economics and Sociology.
    17. Andreas Georgiadis, 2013. "Efficiency Wages and the Economic Effects of the Minimum Wage: Evidence from a Low-Wage Labour Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 962-979, December.
    18. Philippe Askenazy & Eve Caroli & Jérôme Gautié, 2009. "Un panorama des bas salaires et de la qualité de l'emploi peu qualifié en France," Working Papers halshs-00567693, HAL.
    19. Jürgen Kromphardt, 2008. "Eine Gegen-Anmerkung zur Reallohnentwicklung in Deutschland," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 61(02), pages 1-20, January.
    20. Bert Rürup, 2008. "Für einen moderaten allgemeinen Mindestlohn," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 61(06), pages 05-07, March.

    More about this item

    Keywords

    national minimum wage; employment; compliance;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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