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Abstract:

Journal article
The Effects of Minimum Wages on Employment: Theory and Evidence from Britain
Richard Dickens, Stephen Machin and Alan Manning
January 1999

Journal of Labor Economics 17(1), 1999
DOI: 10.1086/209911
https://www.journals.uchicago.edu/doi/10.1086/209911


Tags: national minimum wage; uk; employment

Recent work on the economic effects of minimum wages has stressed that the standard economic model, where increases in minimum wages depress employment, is not supported by empirical work in some labor markets. We present a general theoretical model whereby employers have some degree of monopsony power, which allows minimum wages to have the conventional negative impact on employment but which also allows for a neutral or positive impact. Studying the industry-based British Wages Councils between 1975 and 1992, we find that minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment.

DOI: 10.1086/209911
https://www.journals.uchicago.edu/doi/10.1086/209911