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Abstract:

cover
CEP Discussion Paper
The Employment Effects of the October 2003 Increase in the National Minimum Wage
Richard Dickens and Mirko Draca
June 2005
Paper No' CEPDP0693:
Full Paper (pdf)

JEL Classification: J31; J63


Tags: minimum wages; employment transitions; wages

There is a growing body of research that measures employment effects of the minimum wage by using longitudinal data on individuals to compare job loss of workers affected by a minimum wage increase with those who are not directly affected. This sort of study requires good quality wage data in order to clearly identify these treatment and control groups. Much of the evidence on the impact of the UK minimum wage uses this technique with poor quality wage data. This paper examines the impact of the October 2003 increase in the National Minimum Wage (NMW) using a much better measure of the wage. We find insignificant negative effects on the employment retention rates of all adults and, most notably, male workers. Analysis of the probability of employment retention across different hourly wage rates also show how sensitive this methodology can be to different definitions of the treatment and control group.