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Career Wage Profiles and the Minimum Wage

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  • Papps, Kerry L.

    (University of Bradford)

Abstract

A model of on-the-job training in the presence of a minimum wage is presented. This predicts that the minimum wage will have a negative effect on a worker's subsequent wage growth when the labour market is competitive but a U-shaped effect when it is not competitive. This prediction is then tested using data from the Annual Survey of Hours and Earnings in the United Kingdom. Workers who were affected by the minimum wage before age 22 are found to have significantly lower wage growth later in life than others, but only if they worked on jobs that were not covered by a collective labour agreement. Evidence suggests that this difference in wage growth reflects differences in productivity between workers. The results reconcile previous theoretical predictions by Becker and Acemoglu and Pischke.

Suggested Citation

  • Papps, Kerry L., 2014. "Career Wage Profiles and the Minimum Wage," IZA Discussion Papers 8421, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8421
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    References listed on IDEAS

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    1. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    2. David Fairris & Roberto Pedace, 2004. "The Impact of Minimum Wages on Job Training: An Empirical Exploration with Establishment Data," Southern Economic Journal, John Wiley & Sons, vol. 70(3), pages 566-583, January.
    3. Janet Currie & Bruce C. Fallick, 1996. "The Minimum Wage and the Employment of Youth Evidence from the NLSY," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 404-428.
    4. Neumark, David & Wascher, William, 2001. "Minimum Wages and Training Revisited," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 563-595, July.
    5. Simon Rottenberg, 1981. "The Economics of Legal Minimum Wages," Books, American Enterprise Institute, number 971842, September.
    6. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    7. 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.
    8. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    9. Adam J. Grossberg & Paul Sicilian, 1999. "Minimum Wages, On-the-Job Training, and Wage Growth," Southern Economic Journal, John Wiley & Sons, vol. 65(3), pages 539-556, January.
    10. Linneman, Peter, 1982. "The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 443-469, June.
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    12. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
    13. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-1087, December.
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    Cited by:

    1. Ana Rute Cardoso, 2019. "Long‐Term Impact of Minimum Wages on Workers’ Careers: Evidence from Two Decades of Longitudinal Linked Employer–Employee Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1337-1380, October.

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    More about this item

    Keywords

    minimum wages; wage growth; competitiveness;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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