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Why has the British national minimum wage had little or no impact on employment?

Metcalf, David (2007) Why has the British national minimum wage had little or no impact on employment? CEPDP, 781. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753019981

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Identification Number: 781


A century has passed since the first call for a British national minimum wage (NMW). That remarkable Fabian tract discussed wage setting, coverage, monopsony, international labour standards, inspection and compliance and the interaction between the NMW and the social security system. The NMW was finally introduced in 1999. It has raised the real and relative pay of low wage workers, narrowed the gender pay gap and now covers around 1-worker-in-10. The consequences for employment have been extensively analysed using information on individuals, areas and firms. There is little or no evidence of any employment effects. The reasons for this include: an impact on hours rather than workers; employer wage setting and labour market frictions; offsets via the tax credit system; incomplete compliance; improvements in productivity; an increase in the relative price of minimum wage-produced consumer services; and a reduction in the relative profits of firms employing low paid workers.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2007 David Metcalf
Subjects: H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 21 Jul 2008 12:57
Last Modified: 01 Oct 2010 09:12

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