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Work-related training and the new National Minimum Wage in Britain -ISER Working Paper-

  • Arulampalam, Wiji
  • Booth, Alison L.
  • Bryan, Mark L.

In this paper we use important new training and wage data from the British Household Panel Survey to estimate the impact of the national minimum wage (introduced in April 1999) on the work-related training of low-wage workers. We use two 'treatment groups' for estimating the impact of the new minimum wage - those workers who explicitly stated they were affected by the new minimum and those workers whose derived 1998 wages were below the minimum. Using difference-in-differences techniques for the period 1998 to 2000, we find no evidence that the introduction of the minimum wage reduced the training of affected workers, and some evidence that it increased it. In particular we find a significant positive effect of about 8 to 11% for affected workers. Consequently our findings can be interpreted as providing no evidence in support of the orthodox human capital model as it applies to work-related training, and some evidence in support of the new theories based on imperfectly competitive labour markets. Our estimates also suggest that two of the goals of the UK government - improving wages of the low paid and developing their skills - have been compatible, at least for the introductory rates of the national minimum wage.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2003-05.

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Date of creation: 01 Mar 2003
Date of revision:
Publication status: published
Handle: RePEc:ese:iserwp:2003-05
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  1. Daron Acemoglu & Steve Pischke, 1999. "Minimum Wages and On-the-Job Training," Working papers 99-25, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Janet Currie & Bruce C. Fallick, 1996. "The Minimum Wage and the Employment of Youth Evidence from the NLSY," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 404-428.
  3. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
  4. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December.
  5. Neumark, David & Wascher, William, 2001. "Minimum Wages and Training Revisited," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 563-95, July.
  6. Abowd, John M. & Kramarz, Francis & Margolis, David N. & Philippon, Thomas, 2000. "The Tail of Two Countries: Minimum Wages and Employment in France and the United States," IZA Discussion Papers 203, Institute for the Study of Labor (IZA).
  7. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  8. Adam J. Grossberg & Paul Sicilian, 1999. "Minimum Wages, On-the-Job Training, and Wage Growth," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 539-556, January.
  9. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring.
  10. Booth, Alison L & Zoega, Gylfi, 1999. "Do Quits Cause Under-Training?," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 374-86, April.
  11. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  12. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ojt.
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