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Minimum wage effects: adjustment through labour market dynamics and alternative work arrangements

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  • Pinjas Albagli
  • Rui Costa
  • Stephen Machin

Abstract

This report investigates the UK's 2016 National Living Wage (NLW) introduction, focusing on firm adjustment through labour market transitions and job contract amendments. The NLW boosted worker wages, and whilst there was no change in total employment, firms adjusted through changes in employment composition and by altering employment contracts. The NLW spurred increased transitions from temporary to permanent roles, reduced underemployment, and shifted workers away from non-standard arrangements like part-time roles. However, a modest rise in zero-hour contracts among exposed workers reflects the nuanced nature of these adjustments. These contract changes, and shifts in composition and transition dynamics, provide insights into ways in which employers adjustment to cost shocks induced by minimum wage increases, and how at the same time they maintain employment stability and reshape within-firm job and career structures.

Suggested Citation

  • Pinjas Albagli & Rui Costa & Stephen Machin, 2025. "Minimum wage effects: adjustment through labour market dynamics and alternative work arrangements," CEP Reports 49, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepsps:49
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    References listed on IDEAS

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    Keywords

    UK Economy; Wages; employment;
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