The report considers the effects of the UK national minimum wage on different labour market sub-groups since 1999 when it was first launched. The findings suggest that increases in the national minimum wage had no negative employment effects on the overall UK labour market. Many of the effects following these increases were largely positive in terms of reducing pay inequality and improving the standards of living for low-paid workers.

Cover: The impact of the National Minimum Wage on employment
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The impact of the National Minimum Wage on employment

A meta-analysis

by Marco Hafner, Jirka Taylor, Paulina Pankowska, Martin Stepanek, Shanthi Nataraj, Christian Van Stolk

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Research Question

  1. What has been the impact of increases in the UK national minimum wage on different labour market sub-groups since 1999?

Since its introduction in 1999, the impact of the UK national minimum wage on a range of key indicators has been well-documented and gained wide political support. However, the introduction of the National Living Wage, which increased the wage floor for those aged 25 and over to £7.20 an hour from £6.50 in April 2016, represented a significant growth and requires additional insight into the effects of such changes on the employment and hours outcomes of low-paid workers and firms in low-paying sectors.

In light of this latest development, the report considers the effects of the UK national minimum wage on different labour market sub-groups since 1999. Overall, the findings suggest that increases in the national minimum wage had no negative employment effects on the overall UK labour market. Many of the effects following these increases were largely positive in terms of reducing pay inequality and improving the standards of living for low-paid workers.

However, a further sub-group analysis of the UK labour market found some adverse negative employment effects on certain sub-groups as a result of increases in the national minimum wage. This includes part-time employees who have endured some adverse negative employment effects compared to other labour market groups.

The study is feeding into a number of empirical studies investigating the employment effects of the national minimum wage, which have been commissioned by the Low Pay Commission, an independent body that provides recommendations on whether and how the UK's national minimum wage rate should be reviewed.

Key Findings

  • Increases in the UK national minimum wage since 1999 had no negative employment effects on the overall UK labour market. Many of the effects following these increases were largely positive in terms of reducing pay inequality and improving the standards of living for low-paid workers.
  • However, a further sub-group analysis of the UK labour market found some adverse negative employment effects on certain sub-groups as a result of increases in the national minimum wage. This included part-time employees who have endured some adverse negative employment effects compared to other labour market groups.
  • Only during the recession in 2008 were young employees adversely affected, with a decrease in employment retention probabilities. However, it is hard to link this solely to increases in the national minimum wage, as other factors linked to the recession may have contributed to this decrease.

Table of Contents

  • Chapter One

    Background

  • Chapter Two

    The meta-sample: systematic review and data collection

  • Chapter Three

    Meta-regression analysis

  • Chapter Four

    Discussion

Research conducted by

The research project was commissioned by the UK Low Pay Commission (LPC) and conducted by RAND Europe.

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