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Company wage policy in a low-wage labor market

Author

Listed:
  • 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," LSE Research Online Documents on Economics 137784, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:137784
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    File URL: https://researchonline.lse.ac.uk/id/eprint/137784/
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    References listed on IDEAS

    as
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    Keywords

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    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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