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The Dynamics of the National Minimum Wage: Transitions Between Different Labour Market States

Author

Listed:
  • Jones, Melanie K.

    (Cardiff University)

  • Jones, Richard J.

    (Swansea University)

  • Murphy, Philip D.

    (Swansea University)

  • Sloane, Peter J.

    (Swansea University)

Abstract

An important policy issue is whether the National Minimum Wage (NMW) introduced in Britain in April 1999, is a stepping stone to higher wages or traps workers in a low-wage – no-wage cycle. In this paper we utilise the longitudinal element of the Labour Force Survey over the period 1999 to 2003 to model transitions between different labour market states – payment at or below the NMW, above the NMW, unemployment and inactivity, using a multinomial logit approach. It appears that for many workers payment at or below the NMW is of relatively short duration and a substantial number move into higher paid jobs.

Suggested Citation

  • Jones, Melanie K. & Jones, Richard J. & Murphy, Philip D. & Sloane, Peter J., 2005. "The Dynamics of the National Minimum Wage: Transitions Between Different Labour Market States," IZA Discussion Papers 1690, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1690
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    References listed on IDEAS

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    1. Michael Ransom & Ronald L. Oaxaca, 2005. "Intrafirm Mobility and Sex Differences in Pay," ILR Review, Cornell University, ILR School, vol. 58(2), pages 219-237, January.
    2. Jonathan Wadsworth, 2009. "Minimum Wages," The Economic Record, The Economic Society of Australia, vol. 85(271), pages 491-492, December.
    3. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training and the new minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages 87-94, March.
    4. David Neumark & Olena Nizalova, 2007. "Minimum Wage Effects in the Longer Run," Journal of Human Resources, University of Wisconsin Press, vol. 42(2).
    5. Rita Asplund & Peter Sloane & Ioannis Theodossiou (ed.), 1998. "Low Pay and Earnings Mobility in Europe," Books, Edward Elgar Publishing, number 1533.
    6. David Metcalf, 2004. "The impact of the national minimum wage on the pay distribution, employment and training," Economic Journal, Royal Economic Society, vol. 114(494), pages 84-86, March.
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    Cited by:

    1. Arne Uhlendorff, 2006. "From No Pay to Low Pay and Back Again?: A Multi-State Model of Low Pay Dynamics," Discussion Papers of DIW Berlin 648, DIW Berlin, German Institute for Economic Research.
    2. Agne Lauzadyte, 2007. "A Statistical Programme Assignment Model," Economics Working Papers 2007-18, Department of Economics and Business Economics, Aarhus University.

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    More about this item

    Keywords

    steady state distributions; transitions; national minimum wage;
    All these keywords.

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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