Document Abstract

What do we really know about the employment effects of the UK’s National Minimum Wage?

Re-evaluates the impact of the national minimum wage (NMW) on employment, taking account of concerns regarding the methodologies used to develop the existing evidence base. Notes that a substantial body of research on the UK’s NMW has concluded that the it has not had a detrimental effect on employment, and that this research has directly influenced, through the Low Pay Commission, the conduct of policy, including the subsequent introduction of the National Living Wage (NLW). Argues that much of the literature employs difference-in-difference designs, even though there are significant challenges in conducting appropriate inference in such designs, and they can have very low power when inference is conducted appropriately, and claims that the literature has focused on the binary outcome of statistical rejection of the null hypothesis, without attention to the range of positive or negative impacts on employment that are consistent with the data. Conducts inference using recent suggestions for best practice and considers what magnitude of employment effects the data can and cannot rule out. Finds that the data are consistent with both large negative and small positive impacts of the UK National Minimum Wage on employment. Concludes that the existing data, combined with difference-in-difference designs, offered very little guidance to policy makers.


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Brewer, Mike; Crossley, Thomas; Zilio, Federico
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Institute for Fiscal Studies (IFS)

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