National Minimum Wage

Appendix 2: Low Pay Commission Research
in some specifications of a reduction in basic hours of around 2-4 hours a week for both men
and women following the 2010 minimum wage uprating. They found some evidence of a
significant negative effect on hours among youths (aged 18-21 years old), with basic hours
reduced by around 3-4 hours a week during the recession (2008-2010). They also found
similar effects for the 2003-2007 upratings, but these effects appeared stronger and more
robust during the recession. They did, however, caution that these results for young workers
were based on small sample sizes.
9 The research also found that the minimum wage had no effect on the probabilities of
unemployed adults entering work in any year. They concluded that there was little evidence
that the recession had increased the sensitivity of employment to increases in the minimum
wage. But their findings added to the existing literature that the minimum wage may have
had an impact on hours, especially for young workers.
10 Noting that the recent recession was the first recessionary period since the introduction of
the NMW, Dolton, Lin, Makepeace and Tremayne (2011) analysed pay data from 1977-2009
to assess the impact of previous recessions on the distribution of pay settlements and
earnings. Building on that work and extending the data period to 2011, Dolton, Makepeace
and Tremayne (2012) again found a clear positive effect of price inflation on wage
settlements; a negative effect of unemployment on wage settlements, consistent with the
previous literature on the Phillips Curve and the Wage Curve; but in contrast to their previous
study, they found no significant effect of minimum wage upratings on wage growth or pay
settlements over the whole period since the National Minimum Wage was introduced.
This, they argued, was consistent with previous research findings of limited spill-over effects
of the minimum wage on earnings higher up the wage distribution.
11 Dolton, Rosazza Bondibene and Stops (2012) conducted spatial analysis to look at the impact
on employment. They found that the minimum wage had no adverse impact on local area
employment and may even have had a positive effect in some years. Further, this result
seemed to be invariant to the level of geography used or the way in which the recession was
modelled. They concluded that the spatial effects of the minimum wage on employment
were limited.
12 Four of the research projects related to young people, looking again at the relationship
between age, wages and productivity; the impact on employment, schooling, and education;
relative earnings growth; and the impact of the introduction of the Apprentice Rate.
13 Dickerson and McIntosh (2012) built on work commissioned last year (Dickerson and
McIntosh, 2011) that had investigated the relationship between productivity, earnings and
age, with a focus on the early years of work. They extended their analysis up to 2010 and
estimated empirical age-earnings profiles and wage-productivity gaps across different aged
workers. Their previous results suggested that the introduction of the NMW had not affected
age-earnings profiles. The age-productivity profile was estimated to be similar to the ageearnings
profile, albeit a little steeper. They concluded that young workers were overpaid
relative to their productivity compared with workers in their 30s. The introduction of the
minimum wage did not seem to have affected wage growth relative to productivity growth
for young workers but relative productivity had fallen for older workers since 1999.
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