Work-Related Training and the New National Minimum Wage in Britain

46 Pages Posted: 21 Oct 2002

See all articles by Wiji Arulampalam

Wiji Arulampalam

University of Warwick - Department of Economics; IZA Institute of Labor Economics

Alison L. Booth

Australian National University (ANU) - Research School of Social Sciences (RSSS); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Mark L. Bryan

University of Essex - Institute for Social and Economic Research (ISER)

Date Written: October 2002

Abstract

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.

Keywords: Minimum Wages, Human Capital, Work-related Training, Difference-in-differences Estimation

JEL Classification: J24, J31, J41

Suggested Citation

Arulampalam, Wiji and Booth, Alison L. and Bryan, Mark L., Work-Related Training and the New National Minimum Wage in Britain (October 2002). Available at SSRN: https://ssrn.com/abstract=341520

Wiji Arulampalam

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
01203 523471 (Phone)
01203 523032 (Fax)

IZA Institute of Labor Economics

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

Alison L. Booth

Australian National University (ANU) - Research School of Social Sciences (RSSS) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 3285 (Phone)
+61 2 6125 0182 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Mark L. Bryan (Contact Author)

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206 874683 (Phone)
+44 1206 873151 (Fax)

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