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Company Wage Policy in a Low-Wage Labor Market

Author

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  • Giupponi, Giulia
  • Machin, Stephen

Abstract

We study how firms set wages for their employees when they can legally age-discriminate across workers. We exploit an age-specific minimum wage change in the UK, which raised the minimum applying to workers aged 25 and over, leaving unchanged the minima for younger workers. Using matched employer-employee data on a low-paying sector, we show large, positive wage spillovers on workers aged under 25, which arise within firms from company wage policy. Pay equity norms offer the most parsimonious explanation for the emergence of spillovers. The effects that we document also operate in other low-paying sectors of the UK labor market.

Suggested Citation

  • Giupponi, Giulia & Machin, Stephen, 2026. "Company Wage Policy in a Low-Wage Labor Market," CEPR Discussion Papers 21345, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21345
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    Cited by:

    1. is not listed on IDEAS
    2. John Forth & Carl Singleton & Alex Bryson & Van Phan & Felix Ritchie & Lucy Stokes & Damian Whittard, 2025. "The Impact of a Rising Wage Floor on Labour Mobility Across Firms," British Journal of Industrial Relations, London School of Economics, vol. 63(4), pages 746-757, December.
    3. Matthew Nibloe, 2025. "Levelling down: the distributional consequences of public pay caps," IFS Working Papers W25/27, Institute for Fiscal Studies.
    4. Datta, Nikhil & Machin, Stephen, 2024. "Government Contracting and Living Wages > Minimum Wages," IZA Discussion Papers 17117, IZA Network @ LISER.
    5. Ellora Derenoncourt & David Weil, 2024. "Voluntary Minimum Wages," Working Papers 333, Princeton University, Department of Economics, Center for Economic Policy Studies..
    6. Amior, Michael & San, Shmuel, 2026. "Internal Pay Equity and the Quantity-Quality Trade-Off in Hiring," CEPR Discussion Papers 21191, Centre for Economic Policy Research.

    More about this item

    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
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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