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Why has the British national minimum wage had little or no impact on employment?

Author

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  • Metcalf, David

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

  • Metcalf, David, 2007. "Why has the British national minimum wage had little or no impact on employment?," LSE Research Online Documents on Economics 19742, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:19742
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    File URL: http://eprints.lse.ac.uk/19742/
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    References listed on IDEAS

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    1. Metcalf, David, 1999. "The Low Pay Commission and the National Minimum Wage," Economic Journal, Royal Economic Society, vol. 109(453), pages 46-66, February.
    2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    3. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
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    5. Brown, W., 2005. "The Low Pay Commission After Eight Years," Cambridge Working Papers in Economics 0544, Faculty of Economics, University of Cambridge.
    6. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
    7. Connolly, Sara & Gregory, Mary, 2002. " The National Minimum Wage and Hours of Work: Implications for Low Paid Women," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, pages 607-631.
    8. David Metcalf, 1999. "The British National Minimum Wage," CEP Discussion Papers dp0419, Centre for Economic Performance, LSE.
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    13. Metcalf, David, 1999. "The British national minimum wage," LSE Research Online Documents on Economics 20229, London School of Economics and Political Science, LSE Library.
    14. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-350, April.
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    19. Fitzner, Grant, 2006. "How have employees fared? Recent UK trends," MPRA Paper 4748, University Library of Munich, Germany.
    20. Helen Robinson & Jonathan Wadsworth, 2004. "Did The Minimum Wage Affect The Incidence Of Second Job Holding In Britain?," Royal Economic Society Annual Conference 2004 24, Royal Economic Society.
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    Citations

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    Cited by:

    1. 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.
    2. Pantea, Smaranda, 2017. "Did minimum wage increases reduce employment? Panel data evidence from Romania," MPRA Paper 79863, University Library of Munich, Germany.
    3. Alan Manning, 2013. "Minimum Wages: A View from the UK," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 14(1-2), pages 57-66, February.
    4. 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.
    5. repec:hal:cesptp:halshs-00567693 is not listed on IDEAS
    6. 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.

    More about this item

    Keywords

    national minimum wage; employment; compliance;

    JEL classification:

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

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