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New Research Says Minimum Wage Has No Adverse Impact on Employment

Originally published 26 March 2002

Prior to its introduction, gloomy predictions were made in many quarters about the likely employment effects of the minimum wage. But new research by Professor Mark Stewart of the University of Warwick, presented at the Royal Economic Society's Annual Conference on Wednesday 27 March shows that many of these forecasts have proved very wide of the mark. Careful examination of three large nationally representative data sets reveals that the minimum wage has had no significant adverse effects on employment.

Professor Stewart's study uses longitudinal data from three contrasting individual-level data sets: matched Labour Force Surveys, the British Household Panel Survey and matched New Earnings Surveys. From these data, he estimates the impact of the introduction of the UK minimum wage - in April 1999 - on the probability of subsequent employment among those whose wages would have needed to be raised to comply with the minimum.

The standard textbook treatment of minimum wages says that the introduction of a minimum above the wage floor that would pertain in an unregulated labour market will cause employers to reduce their demand for labour. In other words, jobs will be lost. However no significant employment effects are found for any of the four demographic groups considered: adult men, adult women, young men and young women - or in any of the three data sets.

Notes for Editors: 'The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low Wage Workers' by Mark Stewart was presented at the Royal Economic Society's 2002 Annual Conference at the University of Warwick. Stewart is Professor of Economics at the University of Warwick.

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