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Disability and the national minimum wage: a special case?

Burchardt, Tania and McKnight, Abigail (2003) Disability and the national minimum wage: a special case? The London School of Economics and Political Science, London, UK. (Unpublished)

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Abstract

In the debate which preceded the introduction of a National Minimum Wage (NMW) in the UK in April 1999, concern was expressed by some disability organisations that a minimum wage could jeopardise the jobs of low paid disabled workers. This article examines whether the introduction of the NMW had an adverse effect on the employment retention of disabled workers or resulted in a reduction in the hours they worked. It applies a difference-indifference methodology to data from 5-quarter panels from the Labour Force Survey for the period prior to the NMW and a period which spanned the introduction of the NMW. A difference-in-difference methodology allows any differential effect of the NMW between disabled and non-disabled employees to be detected despite measurement error in hourly wages. Various specifications of the estimations are tried to test the robustness of the results. The results show that employment retention rates improved for low paid disabled employees over the period of the introduction of the NMW, but that relative to others, disabled employees earning less than the NMW rate before its introduction did not enjoy the same improvement. However, when employment transitions are modelled separately for men and women, the relative fall in employment retention was not found to be statistically significant. There is also evidence that low paid disabled men changed their hours around the time of the introduction of the minimum wage (relative to other groups); more detailed analysis indicates this was more likely to be part of a long-term trend rather than a result of the NMW itself. Exempting disabled employees from the NMW could certainly not be justified on the basis of these results. The majority of disabled workers whose earnings were below the level of the NMW before its introduction retained their employment, and benefited from higher wages. A small minority may have left employment (and who would not otherwise have done so) but disabled employees would benefit more from better enforcement of the Disability Discrimination Act and/or an increase in public funding for supported employment programmes than through an exemption from the NMW.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/
Additional Information: © 2003 The Authors
Subjects: H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Research centres and groups > Centre for Analysis of Social Exclusion (CASE)
Date Deposited: 30 Oct 2014 13:37
Last Modified: 30 Oct 2014 13:49
Funders: Nuffield Foundation
URI: http://eprints.lse.ac.uk/id/eprint/60003

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