The Dynamics of the National Minimum Wage: Transitions Between Different Labour Market States

Melanie K. Jones, Richard John Jones, Philip D. Murphy and Peter James Sloane
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Melanie K. Jones: WELMERC, University of Wales Swansea
Philip D. Murphy: WELMERC, University of Wales Swansea

No 1690, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: An important policy issue is whether the National Minimum Wage (NMW) introduced in Britain in April 1999, is a stepping stone to higher wages or traps workers in a low-wage – nowage cycle. In this paper we utilise the longitudinal element of the Labour Force Survey over the period 1999 to 2003 to model transitions between different labour market states – payment at or below the NMW, above the NMW, unemployment and inactivity, using a multinomial logit approach. It appears that for many workers payment at or below the NMW is of relatively short duration and a substantial number move into higher paid jobs.

Keywords: national minimum wage; transitions; steady state distributions (search for similar items in EconPapers)
JEL-codes: J0 J3 J6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm and nep-lab
Date: 2005-07
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