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The Productivity-Enhancing Impacts of the Minimum Wage: Lessons from Denmark and New Zealand

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Abstract

This article adds an international comparative perspective to the reflection on 100 years of minimum wage legislation in Britain by exploring the impact of minimum wage regulations and institutions in Denmark and New Zealand. In particular, it looks at the question of whether minimum wages can raise productivity through the ‘shock effect’. It argues that while they will play a role, a supportive institutional framework is more important in providing coordinated solutions to issues of market failure, such as inadequate levels of training. The article suggests that sectoral bargaining institutions in low-paid sectors may have the potential to facilitate such coordination and enable the high-productivity model to emerge.

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