| Practice area: | Education and Labour Markets |
|---|---|
| Client: | Low Pay Commission |
| Published: | 19 January, 2023 |
| Keywords: | quantitative analysis 2023 Labour Market Economics Minimum wage Public Policy |
London Economics were commissioned by the Low Pay Commission, who recommend changes to the minimum wage to the UK government, to investigate the impact of extending the eligibility to the National Living Wage from those aged 25 and above to include 23- and 24-year-olds in April 2021.
The research of the Labour Force Survey and the Annual Survey of Hours and Earnings focused on the labour market impact of the higher minimum wage increase 23- and 24-year-olds received in April 2021 (8.7% increase) compared to older workers (2.2% increase).
Headline findings include
1 . The age of entitlement to the NLW was reduced from 25 to 23 on 1 April 2021. This resulted in an increase in the statutory minimum wage for 23- and 24-year-olds of 8.7 per cent compared with 2.2 per cent for those aged 25 and over, and 2.0 per cent for those aged 21-22.
2. There appears to be no significant impact on the labour market outcomes when using the entire sample of 23- and 24-year-olds.
3. In addition, there appears to be no significant negative impact on employment for almost every subset of the sample tested.
4. There was a significant decrease in average hours worked when focusing on low-paying sectors and occupations (in particular for female workers) driven by shift to part-time work. The effects were larger than the increase in hourly wages, suggesting a fall in average earnings.
5. However, the decrease in average hours worked could have been driven by the addition of new part-time workers as well as any decrease in hours of any given worker.
The full report can be found here, along with the 2022 Low Pay Commission report that refers to the research here.
This report follows on from previous research London Economics has undertaken on behalf of the Low Pay Commission (for example the impact of changing minimum wage age of eligibility thresholds in a 2015 report here).
London Economics is currently undertaking research on behalf of the Low Pay Commission that uses machine-learning classification methods to investigate the impact of the minimum wage across newly defined groups in the labour market.