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The Dynamics of the National Minimum Wage: Transitions Between Different Labour Market States

Author

Listed:
  • Jones, Richard J.

    () (Swansea University)

  • Murphy, Philip D.

    () (Swansea University)

  • Sloane, Peter J.

    () (Swansea University)

Abstract

An important policy issue is whether the National Minimum Wage (NMW) introduced in Britain in April 1999, is a stepping stone to higher wages or traps workers in a low-wage – no-wage cycle. In this paper we utilise the longitudinal element of the Labour Force Survey over the period 1999 to 2003 to model transitions between different labour market states – payment at or below the NMW, above the NMW, unemployment and inactivity, using a multinomial logit approach. It appears that for many workers payment at or below the NMW is of relatively short duration and a substantial number move into higher paid jobs.

Suggested Citation

  • Jones, Richard J. & Murphy, Philip D. & Sloane, Peter J., 2005. "The Dynamics of the National Minimum Wage: Transitions Between Different Labour Market States," IZA Discussion Papers 1690, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1690
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    References listed on IDEAS

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    1. David Neumark & Olena Nizalova, 2007. "Minimum Wage Effects in the Longer Run," Journal of Human Resources, University of Wisconsin Press, vol. 42(2).
    2. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training and the new minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages 87-94, March.
    3. Jonathan Wadsworth, 2009. "Minimum Wages," The Economic Record, The Economic Society of Australia, vol. 85(271), pages 491-492, December.
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    Cited by:

    1. Agne Lauzadyte, 2007. "A Statistical Programme Assignment Model," Economics Working Papers 2007-18, Department of Economics and Business Economics, Aarhus University.
    2. Arne Uhlendorff, 2006. "From No Pay to Low Pay and Back Again?: A Multi-State Model of Low Pay Dynamics," Discussion Papers of DIW Berlin 648, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    steady state distributions; transitions; national minimum wage;

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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