Minimum Wage and Tolerance for High Incomes

Andrea Fazio () and Tommaso G. Reggiani ()
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Tommaso G. Reggiani: Cardiff University

No 16107, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We suggest that stabilizing the baseline income can make low-wage workers more tolerant towards high income earners. We present evidence of this attitude in the UK by exploiting the introduction of the National Minimum Wage (NMW), which institutionally sets a baseline pay reducing the risk of income losses and providing a clear reference point for British workers at the lower end of the income distribution. Based on data from the British Household Panel Survey (BHPS), we show that workers who benefited from the NMW program became relatively more tolerant of high incomes and more likely to support and vote for the Conservative Party. As far as tolerance for high incomes is related to tolerance of inequality, our results may suggest that people advocate for equality also because they fear income losses below a given reference point.

Keywords: inequality; redistribution; minimum wage; loss aversion; reference point; UK (search for similar items in EconPapers)
JEL-codes: D63 D69 H10 H53 Z1 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2023-05
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

Published - published in: European Economic Review, 2023, 155, 104445

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Journal Article: Minimum wage and tolerance for high incomes (2023)
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