Company wage policy in a low-wage labor market

Giulia Giupponi and Stephen Machin

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study how firms set wages for their employees when they can legally age discriminate across workers. We exploit an age-specific minimum wage change in the UK, which raised the minimum applying to workers aged 25 and over, leaving unchanged the minima for younger workers. Using matched employer-employee data on a low-paying sector, we show large, positive wage spillovers on workers aged under 25, which arise within firms from company wage policy. Pay equity norms offer the most parsimonious explanation for the emergence of spillovers. The effects that we document also operate in other low-paying sectors of the UK labor market.

Keywords: pay equity; wage setting; minimum wage (search for similar items in EconPapers)
JEL-codes: D63 J31 J38 M52 (search for similar items in EconPapers)
Date: 2026-09-30
New Economics Papers: this item is included in nep-bec
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Published in Review of Economic Studies, 30, September, 2026. ISSN: 0034-6527

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:137784

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