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Did the national minimum wage affect UK prices?

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  • Wadsworth, Jonathan

Abstract

One potential channel through which the effects of the minimum wage could be directed is that firms who employ minimum wage workers could have passed on any higher labour costs resulting from the minimum wage in the form of higher prices. This study looks at the effects of the minimum wage on the prices of UK goods and services by comparing prices of goods produced by industries in which UK minimum wage workers make up a substantial share of total costs with prices of goods and services that make less use of minimum wage labour. Using sectoral-level price data matched to LFS survey data on the share of minimum wage workers in each sector, it is hard to find much evidence of significant price changes in the months that correspond immediately to the uprating of the NMW. However over the longer term, prices in several minimum wage sectors – notably take-away foods, canteen meals, hotel services and domestic services - do appear to have risen significantly faster than prices of non-minimum wage sectors. These effects were particularly significant in the four years immediately after the introduction of the minimum wage.

Suggested Citation

  • Wadsworth, Jonathan, 2009. "Did the national minimum wage affect UK prices?," LSE Research Online Documents on Economics 28677, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:28677
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    File URL: http://eprints.lse.ac.uk/28677/
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    Cited by:

    1. Caliendo, Marco & Wittbrodt, Linda, 2022. "Did the minimum wage reduce the gender wage gap in Germany?," Labour Economics, Elsevier, vol. 78(C).
    2. Dr. Nickolaos Giovanis, 2018. "Determining Factors of Minimum Wage in the Member States of the OECD," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 1(4), pages 93-101, 12-2018.
    3. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    4. Ana Rincon-Aznar, 2009. "Rates of return and alternative measures of capital input: 14 countries and 10 branches, 1971-2005," National Institute of Economic and Social Research (NIESR) Discussion Papers 347, National Institute of Economic and Social Research.
    5. Brian Bell & Nicholas Bloom & Jack Blundell, 2021. "This time is not so different: income dynamics during the Covid-19 recession," POID Working Papers 012, Centre for Economic Performance, LSE.
    6. David Pothier, 2014. "A Minimum Wage for Germany: What Should We Expect?," DIW Roundup: Politik im Fokus 7, DIW Berlin, German Institute for Economic Research.
    7. Bachmann, Ronald & Bonin, Holger & Boockmann, Bernhard & Demir, Gökay & Felder, Rahel & Isphording, Ingo & Kalweit, René & Laub, Natalie & Vonnahme, Christina & Zimpelmann, Christian, 2020. "Auswirkungen des gesetzlichen Mindestlohns auf Löhne und Arbeitszeiten: Studie im Auftrag der Mindestlohnkommission," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 222998.
    8. Benassi, Chiara., 2011. "The implementation of minimum wage : challenges and creative solutions," ILO Working Papers 994629883402676, International Labour Organization.
    9. Mustafa Utku Özmen, 2020. "In Pursuit Of Understanding Markups In Restaurant Services Prices," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1423-1437, December.
    10. Daniel MacDonald & Eric Nilsson, 2016. "The Effects of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context," Upjohn Working Papers 16-260, W.E. Upjohn Institute for Employment Research.
    11. Sila, Urban, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics 28684, London School of Economics and Political Science, LSE Library.
    12. Philipp Berge & Hanna Frings, 2020. "High-impact minimum wages and heterogeneous regions," Empirical Economics, Springer, vol. 59(2), pages 701-729, August.
    13. Bachmann, Ronald & Boockmann, Bernhard & Gonschor, Myrielle & Kalweit, René & Klauser, Roman & Laub, Natalie & Rulff, Christian & Vonnahme, Christina, 2022. "Auswirkungen des gesetzlichen Mindestlohns auf Löhne und Arbeitszeiten," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 264288.
    14. Ahsan, Ishmam, 2021. "Minimum Wage and Sectoral Price Inflation," MPRA Paper 117350, University Library of Munich, Germany, revised May 2023.
    15. Katalin Bodnár & Ludmila Fadejeva & Stefania Iordache & Liina Malk & Desislava Paskaleva & Jurga Pesliakaitė & Nataša Todorović Jemec & Peter Tóth & Robert Wyszyński, 2018. "How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-30, December.
    16. Rizov, Marian & Croucher, Richard & Lange, Thomas, 2016. "The UK national minimum wage's impact on productivity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 27(4), pages 819-835.
    17. Kaunitz, Niklas & Egebark, Johan, 2017. "Payroll Taxes and Firm Performance," Working Paper Series 1175, Research Institute of Industrial Economics, revised 13 Apr 2018.
    18. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    19. International Monetary Fund, 2016. "Cross-Country Report on Minimum Wages: Selected Issues," IMF Staff Country Reports 2016/151, International Monetary Fund.
    20. Lea Immel, 2021. "The Impact of Labor Market Reforms on Income Inequality: Evidence from the German Hartz Reforms," ifo Working Paper Series 347, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    21. Thomas Werner & Friedrich L. Sell, 2015. "Price Effects of the Minimum Wage: A Survey Data Analysis for the German Construction Sector," LABOUR, CEIS, vol. 29(3), pages 310-326, September.
    22. Riley, Rebecca & Rosazza Bondibene, Chiara, 2017. "Raising the standard: Minimum wages and firm productivity," Labour Economics, Elsevier, vol. 44(C), pages 27-50.
    23. Dr. Nickolaos Giovanis, 2019. "“Determining Factors of Minimum Wage in the Member States of the OECDâ€," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 2(1), pages 6-14, 01-2019.
    24. Peter Dolton, 2012. "The administration and impact of a national minimum wage: lessons for Germany," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(3), pages 201-208, December.
    25. repec:ilo:ilowps:462988 is not listed on IDEAS

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    More about this item

    Keywords

    Minimum wage; prices;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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