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Centre for Policy Studies blog:
Down with the 'living wage'

8 November 2013

Even if the employer decided not to cut back on jobs or hours in the event of a living wage imposition, would this be such a benevolent economic outcome? The other alternatives in the event of unchanged productivity are to pass on the costs in the form of higher prices to customers, or to eat into the profit margin of the company. In fact, evidence from Jonathan Wadsworth for the LSE's Centre for Economic Performance suggests that the minimum wage has led to faster than average price rises in sectors where minimum wage workers operated (like fast food, domestic and hotel services). Likewise, if profit margins being squeezed contributes to a cut in investment, then this itself has consequences for economic growth.

The article was published online on the Centre for Policy Studies blog site on November 8, 2013
Link to article here

Related publications
Should we abolish the minimum wage?, Jonathan Wadsworth, LSE Research and Expertise, March 2012
Employment, Inequality and the UK National Minimum Wage over the Medium-Term, Peter Dolton, Chiara Rosazza-Bondibene and Jonathan Wadsworth, Centre for Economic Performance Discussion Paper No.1007, October 2010
'Did the National Minimum Wage Affect UK Prices?', Jonathan Wadsworth, Centre for Economic Performance Discussion Paper No.947, August 2009

Related Links
Jonathan Wadsworth webpage
Labour Markets Programme webpage

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