| Practice area: | Education and Labour Markets | Higher education |
|---|---|
| Client: | Low Pay Commission |
| Published: | 2 February, 2026 |
| Keywords: | higher education Education Labour Market Economics Longitudinal Education Outcomes Minimum wage |
London Economics’ report investigating the impact of the minimum wage on young people was published by the Low Pay Commission (LPC), an independent body that advises the government on the National Minimum Wage rates. On behalf of the LPC, London Economics used Longitudinal Education Outcomes (LEO) data to assess the impact on young people’s employment, earnings, and their participation in education, as well as providing guidance on how LEO data could be used in minimum wage research.
There has been little research exploring the impact participation in education, especially given many different ways increasing the minimum wage could impact young people’s decisions to undertake more education or training. For example, higher minimum wages may result in a truncated pay distribution, where pay above the minimum wage doesn’t rise as fast as the minimum wage itself. As a result, additional pay associated with higher-level qualifications may not be smaller, so there is a reduced incentive to participation in education and training. However, a higher minimum wage might allow more young people to undertake part-time education and training, when combined with part-time work.
This is important for policymakers to understand for two reasons:
- Any impact that the minimum wage on young people’s human capital investment may have long-term consequences for their future labour market outcomes.
- The choice whether to participate in education may impact short-term labour supply, especially among young people.
This was the first time that the LEO data had been used to evaluate the effects of the minimum wage. The dataset includes every individual born after 1985/86 who has engaged with the English school system, and contains detailed information on individuals’ education history, personal characteristics, and employment outcomes.
We focused on the impact of the introduction of the National Living Wage (NLW) in April 2016, which set a higher minimum wage for those aged 25 and older. Comparing the cohort who were 25 in April 2016 (and eligible for the NLW) to the cohort who were 24 (and so were not eligible), we estimated no significant impact on labour market outcomes or participation in education, both in the immediate aftermath of the introduction of the NLW and in the longer term up to 2019-20.
However, this may be partly due to relatively few 24- and 25-year-olds being in education compared to younger age groups. Future research focusing on recent changes to the minimum wage (such as the reduction in the age of entitlement from age 25 to 23 in April 2021 and from age 23 to 21 in April 2024) would add to policymakers’ understanding of the impact of the minimum on younger people who are more likely to be in education.
The link to the London Economics report published by the Low Pay Commission can be found here. Previous London Economics research was also cited by the Low Pay Commission in their annual report when discussing the impact of the NLW on young people. The annual report also discusses the most recent report in their summary of commissioned research.