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


  • The authors wish to thank the Low Pay Commission for funding this project – although we remain responsible for its contents. We also wish to thank seminar participants at the LPC, LSE, Aberdeen University, NIESR and two anonymous referees for many useful comments.


We assess the impact of the national minimum wage (NMW) on employment and inequality in the UK over the decade since its introduction. We evaluate its effects in each year, using an incremental differences-in-differences (IDiD) estimator. Identification is based on variation in the bite of the NMW across local labour markets and the different sized year on year up-ratings. We find that an increased bite of the NMW is associated with falls in lower tail wage inequality. While the average employment effect over the entire period is broadly neutral, there are small but significant positive NMW effects from 2003 onwards.