National Minimum Wage

National Minimum Wage
160
spill-over effects. In contrast to earlier research, such as Stewart (2009), this suggested that
spill-over effects may be larger than previously thought.
4 Three research projects were commissioned to investigate the impact of the minimum wage
on earnings, employment and hours. Dickens, Riley and Wilkinson (2012) investigated these
effects in two ways. First, they used individual data and second, they took advantage of the
geographical variation in wages. Using the individual data they also looked at how these
minimum wage effects varied by size of firm. In their analysis of individuals using data from
1994-2010, they found that the minimum wage had led to significantly higher wage growth for
low-paid workers and that this effect was particularly large upon introduction. They also found
that wage differentials between minimum wage workers and those paid just above were
restored somewhat during the recent recession years (2008-2010). Their spatial analysis found
a large effect of the minimum wage on pay inequality across areas, as the minimum wage
compressed wages at the bottom of the distribution, particularly in the period before the
recession. Those areas with the lowest wages prior to the introduction of the minimum wage
experienced the greatest falls in inequality over the period from 1998 to 2010.
5 In contrast to previous research that the NMW had raised the earnings of low-paid workers
without affecting employment opportunities, they found some evidence from individual data,
using the New Earnings Survey and in some econometric specifications, that the introduction
of the minimum wage may have had a small adverse impact on the employment
opportunities of women working part-time. This effect was strongest when the minimum
wage was introduced and during the recent recession. In comparison to other workers,
low-paid workers were more likely to work in small firms. Any detrimental employment
effects among low-paid female part-time employees tended to be more significant on
average in large firms.
6 However, in line with previous research, they found no impact for many other low-paid
workers and this finding varied little over the business cycle. They were unable to find any
evidence to suggest that the minimum wage had affected average hours worked in general
but there was some evidence to suggest that the minimum wage may have reduced hours
by around two hours a week for female full-time workers during the recession. Size of firm
did not appear to be a factor with regard to hours.
7 In contrast to the individual results explained above, their spatial analysis found no strong
evidence of adverse effects of the minimum wage on employment or unemployment.
This was despite the large increases in wages at the bottom of the distribution relative to
those higher up. Indeed, their findings suggested that the minimum wage may have had
some positive effects on employment between 2003 and 2007 (the period of large
upratings). They also found evidence that the minimum wage had reduced unemployment
in these years.
8 Bryan, Salvatori and Taylor (2012) used individual data to assess the impact of the minimum
wage on employment, unemployment and hours. In line with previous research findings, they
found little evidence that the minimum wage had affected employment retention in the
period before or during the recession. They found no consistent effect of the minimum wage
on hours for adults across the years, although they did find some weakly significant evidence