Employment, Inequality and the UK National Minimum Wage Over the Medium-Term

43 Pages Posted: 1 Nov 2010

See all articles by Peter Dolton

Peter Dolton

University of London - Institute of Education; IZA Institute of Labor Economics

Chiara Rosazza

affiliation not provided to SSRN

Jonathan Wadsworth

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); IZA Institute of Labor Economics; William Davidson Institute; Royal Holloway College University of London

Abstract

This paper assesses the impact of the National Minimum Wage (NMW) on employment and inequality in the UK over the decade since its introduction in 1999. Identification is facilitated by using variation in the bite of the NMW across local labour markets and the different sized year on year up ratings of the NMW. We use an 'incremental differences-in-differences' (IDiD) estimator which allows us to estimate the effects of the NMW in each year since its introduction. We find that an increased bite of the NMW is associated with falls in lower tail wage inequality. Moreover, while the average employment effect of the NMW over the entire period is broadly neutral, there are small but significant positive employment estimates from 2003 onward, when the average bite of the NMW was at its highest since its introduction.

Keywords: minimum wage, employment, inequality

JEL Classification: J0, J2, J3

Suggested Citation

Dolton, Peter and Rosazza, Chiara and Wadsworth, Jonathan, Employment, Inequality and the UK National Minimum Wage Over the Medium-Term. IZA Discussion Paper No. 5278, Available at SSRN: https://ssrn.com/abstract=1700447

Peter Dolton (Contact Author)

University of London - Institute of Education ( email )

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London, WC1H 0AL
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IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Chiara Rosazza

affiliation not provided to SSRN

Jonathan Wadsworth

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
England

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Royal Holloway College University of London

Senate House
Malet Street
London, TW20 0EX
United Kingdom

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