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MINIMUM WAGE HIKES AND THE WAGE GROWTH OF LOW-WAGE WORKERS

Authors

  • Joanna K. Swaffield

    Corresponding author
    1. Department of Economics and Related Studies, University of York, York, UK
    • Correspondence: Joanna K. Swaffield, Department of Economics and Related Studies, University of York, York YO10 5DD, UK. Tel: (+44) (0)1904 323679; Fax: (+44) (0)1904 323759. Email: jo.swaffield@york.ac.uk.

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  • The author thanks the Economic and Social Research Council for funding the research that this paper builds upon (grant number RES-000–22–0841) and the Low Pay Commission (LPC) for commissioning the extension to the original research. The author would also like to thank seminar participants at the LPC annual research workshops, the Labour & Applied Microeconometrics Seminar, University of Oxford, and the Royal Economic Society's 2009 Special Session: ‘Ten Years of the National Minimum Wage’, and in particular the discussant Jonathan Wadsworth, for helpful comments and suggestions. The Labour Force Survey data were provided via the UK Data Archive and access to the Annual Survey of Hours and Earnings data was via the LPC. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

ABSTRACT

This paper presents difference-in-differences estimates of the impact of the British minimum wage on the wage growth of low-wage employees. Estimates of the probability of low-wage employees receiving positive wage growth have been significantly increased by the minimum wage upratings or hikes. However, whether the actual wage growth of these workers has been significantly raised or not depends crucially on the magnitude of the minimum wage hike considered. Findings are consistent with employers complying with the legally binding minimum wage but holding down or offsetting the wage growth that they might have awarded in periods of relatively low minimum wage hikes.

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