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Minimum wages: possible effects on the distribution of income

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  • Amanda Gosling

    (Institute for Fiscal Studies and University of Essex)

Abstract

Since the 1980s, there has been increased interest among unions and two opposition parties in the possibility of introducing a national minimum wage (NMW). The central argument for a minimum wage is a social justice one: a minimum wage is deemed necessary to prevent some employers exploiting workers with little bargaining power by paying them less than the value of the goods and services they produce. The aim of this paper is to establish what sort of people might be affected by a minimum wage, how this might have changed over time and how far a minimum wage can be used as a tool to redistribute income from the rich to the poor. No attempt is made to simulate the effect of a NMW on employment and prices, and obviously any complete analysis needs to take these effects into account. Recent research (see the discussion below) on this issue, however, indicates little evidence that a `moderate\\\' minimum will have any effect on employment and it is thus likely that the ‘first-round effects\\\' described in this paper are informative.

Suggested Citation

  • Amanda Gosling, 1996. "Minimum wages: possible effects on the distribution of income," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 31-48, November.
    • Handle: RePEc:ifs:fistud:v:17:y:1996:i:4:p:31-48
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    References listed on IDEAS

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    1. Richard Dickens & Alan Manning, 1995. "After Wages Councils," New Economy, Institute for Public Policy Research, vol. 2(4), pages 223-227, December.
    2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
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    Cited by:

    1. Holly Sutherland, 1997. "Women, men and the redistribution of Income," Fiscal Studies, Institute for Fiscal Studies, vol. 18(1), pages 1-22, February.
    2. Brian Nolan & Ive Marx, 1999. "Low Pay and Household Poverty," LIS Working papers 216, LIS Cross-National Data Center in Luxembourg.
    3. Müller, Kai-Uwe & Steiner, Viktor, 2008. "Would a Legal Minimum Wage Reduce Poverty? A Microsimulation Study for Germany," IZA Discussion Papers 3491, Institute of Labor Economics (IZA).
    4. Müller, Kai-Uwe & Steiner, Viktor, 2010. "Labor Market and Income Effects of a Legal Minimum Wage in Germany," IZA Discussion Papers 4929, Institute of Labor Economics (IZA).
    5. Herr, Hansjörg & Kazandziska, Milka & Mahnkopf-Praprotnik, Silke, 2009. "The theoretical debate about minimum wages," GLU Working Papers 6, Global Labour University (GLU).
    6. Scarpetta, Stefano, 1998. "Labour Market Reforms and Unemployment: Lessons from the Experience of the OECD Countries," IDB Publications (Working Papers) 6082, Inter-American Development Bank.
    7. David Metcalf, 1999. "The British National Minimum Wage," CEP Discussion Papers dp0419, Centre for Economic Performance, LSE.
    8. Pio Baake & Vanessa von Schlippenbach, 2008. "Upfront Payments and Listing Decisions," Discussion Papers of DIW Berlin 793, DIW Berlin, German Institute for Economic Research.
    9. Alexandros Karakitsios & Manos Matsaganis, 2018. "Minimum Wage Effects on Poverty and Inequality," DEOS Working Papers 1801, Athens University of Economics and Business.
    10. Metcalf, David, 1999. "The British national minimum wage," LSE Research Online Documents on Economics 20229, London School of Economics and Political Science, LSE Library.
    11. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    12. Nazila Alinaghi & John Creedy & Norman Gemmell, 2020. "The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(4), pages 517-538, December.
    13. Kai-Uwe Müller & Viktor Steiner, 2008. "Would a Legal Minimum Wage Reduce Poverty?: A Microsimulation Study for Germany," Discussion Papers of DIW Berlin 791, DIW Berlin, German Institute for Economic Research.
    14. Adolf STROOMBERGEN & Peter HALL, 2010. "General Equilibrium Analysis of Bio-Energy Options," EcoMod2010 259600160, EcoMod.
    15. Kai-Uwe Müller & Viktor Steiner, 2013. "Distributional Effects of a Minimum Wage in a Welfare State: The Case of Germany," SOEPpapers on Multidisciplinary Panel Data Research 617, DIW Berlin, The German Socio-Economic Panel (SOEP).
    16. Stefano Scarpetta, 1998. "Reformas laborales de mercado y desempleo: enseñanzas de la experiencia de los países de la OCDE," Research Department Publications 4137, Inter-American Development Bank, Research Department.
    17. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.
    18. Sutherland, H., 2001. "The National Minimum Wage and In-work Poverty," Cambridge Working Papers in Economics 0111, Faculty of Economics, University of Cambridge.
    19. Kapelyuk Sergey, 2014. "Impact of minimum wage on income distribution and poverty in Russia," EERC Working Paper Series 14/03e, EERC Research Network, Russia and CIS.

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