We estimate the effect of the introduction of the UK’s National Living Wage in 2016, and increases in it up to 2019, using a new empirical method. We apply a bunching approach to a setting with no geographical variation in minimum wage rates. We effectively compare employment changes in each part of the wage distribution in low-wage areas to employment changes among similar workers living in higher-wage areas who are less exposed to increases in the national minimum wage because their nominal wages are further above it. We find substantial positive wage effects, including statistically significant spillovers up to around the 20th percentile of wages. Overall we find small negative effects on employment which are not statistically significant. We combine these estimates with a tax and benefit microsimulation model to estimate the impact on household incomes. The largest gains go to the middle of the overall working-age income distribution, though they are more concentrated within the bottom third if we consider only households with someone in paid work. The gains to poorer working households are limited by the withdrawal of means tested benefits as earnings increase. Effects of minimum wages on household incomes are very sensitive to the size of employment effects.
Robert is a Deputy Director. His work focuses on primarily on the labour market, income and wealth inequality, and the design of the welfare system.
Jonathan is an Associate Director and Head of Retirement, Savings and Ageing sector, focusing on pensions, savings and later-life economic activity.
Research Fellow University College London
Attila is an IFS Research Fellow, an Associate Professor of Economics at the University College London and Adjust Professor at the University of Oslo.
Tom is an Associate Director at the IFS and Head of the Income, Work and Welfare sector.
Senior Research Economist
Xiaowei joined the IFS in 2018 and works in the Income, Work and Welfare sector.
Research Fellow Bocconi University
Giulia, an Assistant Professor of Economics at Bocconi University, studies the employment and welfare effects of social insurance and minimum wages.
Tom is a Research Economist in the Income, Work and Welfare sector, having joined the IFS in 2020.
Working Paper details
- Institute for Fiscal Studies
Cribb, J et al. (2021). The distributional and employment impacts of nationwide Minimum Wage changes. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/distributional-and-employment-impacts-nationwide-minimum-wage-changes (accessed: 26 February 2024).
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