An examination of the impact of the NMW on earnings, the bite and wage differentials

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Sector: Labour market economics | Labour markets
Client: Low Pay Commission
Published: February, 2016
Document type: Report 
Tagged: 2016 labour market economics public policy

London Economics were commissioned by the Low Pay Commission to undertake an assessment of the ‘bite’ of the minimum wage. The first phase involved a statistical analysis to build an in-depth understanding of how the earnings distribution has changed over time in relation to changes in the National Minimum Wage (NMW), and how the distribution varies by industry, geographical location, size of firm, sector (private or public) and age.

The second phase consisted of an econometric analysis exploring the impact of the NMW on earnings, the ‘bite’ and wage differentials, using a difference-in-difference (DID) approach. In addition, we investigated whether wages and differentials reflect skills and productivity differences by sector, using a fixed effects estimation.