Is the Minimum Wage Efficient? Evidence of the Effects of the UK National Minimum Wage in the Residential Care Homes Sector

Andreas P. Georgiadis ()

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: In this paper we exploit a natural experiment provided by the 1999 introduction and 2001 increase of the UK National Minimum Wage (NMW) to investigate the relationship between wages and supervision and to test for efficiency wages considerations in a low-wage labour market, the UK residential care homes sector. We also provide evidence of the effects of the UK National Minimum Wage introduction and increase on the main labour market outcomes in the sector. We find evidence supporting a wage-supervision trade-off for the 1999 NMW introduction but no evidence of a trade-off for the 2001 NMW increase. We also find that the 1999 NMW introduction caused significant growth in average home hourly wages but only moderate negative employment effects and no significant effect on other outcomes as prices and profits. Finally, we find that the 2001 NMW increase generated higher wage growth than the 1999 introduction but had no employment effect, which can be possibly explained by the fact that homes increased the price of care to offset the increased wage costs generated by the NMW increase.

Keywords: Efficiency Wages; National Minimum Wage; Difference-in-Differences; Insrumental Variables. (search for similar items in EconPapers)
JEL-codes: J38 J41 J48 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2006-08
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp160.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp160.pdf [302 Moved Temporarily]--> https://www.bris.ac.uk/Depts/CMPO/workingpapers/wp160.pdf [301 Moved Permanently]--> https://www.bristol.ac.uk/Depts/CMPO/workingpapers/wp160.pdf [301 Moved Permanently]--> http://www.bristol.ac.uk/cmpo/publications/papers/2006/wp160.pdf [302 Moved Temporarily]--> https://www.bristol.ac.uk/cmpo/publications/papers/2006/wp160.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bri:cmpowp:06/160

Access Statistics for this paper

More papers in The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK Contact information at EDIRC.
Bibliographic data for series maintained by ().