How the national minimum wage affects flows in and out of employment: An investigation using worker-level data

Research output: Book/ReportCommissioned report

Abstract

Recent studies in North America have found that although minimum wages have little effect on employment, they tend to reduce job turnover rates. Using individual-level data, evidence consistent with this is found for the U.K. The minimum wage is found to reduce both the likelihood of an employed worker leaving his/her current job and the likelihood of an unemployed worker entering employment. Most of the job separation effect is due to workers changing jobs rather than exiting employment, which suggests that it is primarily explained by employed workers reducing their proclivity to quit when their current wage rises. Using pseudo-panel data at the industry/region level, further evidence is found that hiring and separation rates fall when the minimum wage rises.
LanguageEnglish
PublisherLow Pay Commission
Commissioning bodyLow Pay Commission
Number of pages37
StatusPublished - 17 Mar 2016

Fingerprint

Workers
National minimum wage
Minimum wage
Wages
Industry
Panel data
Pseudo-panel
Hiring
Quits
Job turnover

Keywords

  • Minimum wage

Cite this

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AB - Recent studies in North America have found that although minimum wages have little effect on employment, they tend to reduce job turnover rates. Using individual-level data, evidence consistent with this is found for the U.K. The minimum wage is found to reduce both the likelihood of an employed worker leaving his/her current job and the likelihood of an unemployed worker entering employment. Most of the job separation effect is due to workers changing jobs rather than exiting employment, which suggests that it is primarily explained by employed workers reducing their proclivity to quit when their current wage rises. Using pseudo-panel data at the industry/region level, further evidence is found that hiring and separation rates fall when the minimum wage rises.

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