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Minimum wages and wage inequality: some theory and an application to the UK

Butcher, Tim and Dickens, Richard and Manning, Alan (2012) Minimum wages and wage inequality: some theory and an application to the UK. CEP Discussion Papers, CEPDP1177. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: CEPDP1177

Abstract

Research suggests that, at the levels set in countries like the US and the UK, minimum wages have little effect on employment but do have impacts on wage inequality. However we lack models that can explain these facts – this paper presents one based on imperfect labour markets. The paper also investigates the impact of the UK’s National Minimum Wage on wage inequality finding it can explain a sizeable part of the evolution of wage inequality in the bottom half of the distribution in the period 1998-2010. We also present evidence that the impact of the NMW reaches up to 40% above the NMW in 2010 which corresponds to the 25th percentile. These spillovers are larger in low-wage segments.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2012 The Authors
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 01 Mar 2013 16:31
Last Modified: 01 Mar 2013 16:31
URI: http://eprints.lse.ac.uk/id/eprint/48937

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