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The minimum wage

Professor Mark Stewart’s analysis of the national minimum wage helped establish it as UK policy, improving the welfare of millions of low-wage employees.

What did the research show?

The UK introduced a national minimum wage in 1999, increasing wages for an estimated 1.3 million employees – 5.5% of the labour force. However, there was uncertainty over whether a minimum wage would ultimately benefit low-skilled workers or leave them worse off by leading employers to cut employment.

Stewart’s research helped resolve this highly contested policy question. In a series of articles in the 2000s, he compared employment growth across regions and between groups of people who were affected and not affected by the minimum wage introduction. He also analysed subsequent increases in the minimum wage in 2000 and 2001. The research found no adverse effects of the minimum wage on employment rates for any demographic groups.

What happened as a result?

Professor Stewart’s work was instrumental in gaining widespread acceptance of the national minimum wage in the UK. It has informed the Low Pay Commission’s (LPC) approach to raising the minimum wage and has been extensively cited in its annual reports to Government. These reports are very influential and the Government has always accepted the LPC’s recommendations on changes to the minimum wage.

The minimum wage is now established policy, increasing earnings for millions of the UK's lowest-income workers. It has also significantly advanced other social and policy goals, such as reducing income inequality, decreasing the gender pay gap, increasing tax revenues, and lowering aggregate benefit payments.

References to the research

1. Stewart, M, 2002, Estimating the Impact of the Minimum Wage Using Geographical Wage Variation, Oxford Bulletin of Economics and Statistics, v64, pp 583–605.

2. Stewart, M, 2003, Modelling the Employment Effects of the Minimum Wage, Research Report for the Low Pay Commission, January, University of Warwick. Later published as (3) below.

3. Stewart, M, 2004a, The Employment Effects of the National Minimum Wage, The Economic Journal, 114, pp C110–C116.

4. Stewart, M, 2004b, The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low Wage Workers, Journal of the European Economic Association, 2(1), pp 67– 97.

5. Stewart, M, and J, Swaffield, 2004, The Other Margin: Do Minimum Wages Cause Working Hours Adjustments for Low-wage Workers?, Research Report for the Low Pay Commission, May, (University of Warwick and University of York). Later published in Economica, v75, pp 148-167.

6. Stewart, M, 2009, Testing for Spill-over Effects of the National Minimum Wage, Research Report for the Low Pay Commission, December, University of Warwick. Parts of this report were later published as Wage Inequality, Minimum Wage Effects and Spillovers, Oxford Economic Papers, October 2012, v64, pp 616-634.