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Labour market institutions and policies

The Centre has built on research into causes and trends in unemployment, wage and job inequality and poverty to inform welfare and employment policies to combat them.

Influential work on New Deal type supply-side policies to help the long term unemployed back into work was followed by work to help keep them there; if people returning to (often low paid) employment were to stay in work they had to be made better off than on benefits. Our research on workless households led to proposals for the introduction of the working families tax credit, now an established part of the welfare system.

Other support for those on low pay comes from the National Minimum Wage, the arguments for which were based on careful analysis of the evidence by researchers at CEP. This was fundamental in changing the consensus view of employers that anything that raised wages must reduce employment. Our findings, which now inform most European minimum wage legislation, showed that at the levels set, national minimum wages (NMW) do not reduce employment.

Legislation such as the NMW, protecting living and working standards, is now all the more important given the retreat of unions from the private sector, especially those parts where work is least secure and well-paid. Our five-year project on the future of trade unions assessed alternative possible replacement arrangements for their role in improving members' pay and conditions and their influence on pay, productivity, profits, investment and employment.

Alan Manning's work on labour market monopsony (where there is a sole or a dominant employer in a labour market giving buying power over their potential employees) played a leading role in setting the stage for more recent research on the role of non-competitive labour markets in the process of wage setting.

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