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NIESR RESEARCH SUGGESTS THE NATIONAL MINIMUM WAGE NEED NOT HARM YOUTH

Yesterday the NIESR published research, supported by the Low Pay Commission and the ESRC, that sheds new – and surprising – light on the impact of the minimum wage on youth employment. As low-skilled young people become entitled to the higher adult rate of the minimum wage, their employment rate actually goes up.

The National Minimum Wage (NMW) in the UK is set differently for different age groups so that young, low-paid individuals experience a legislated hourly wage increase of about 1620% when they qualify for the adult minimum rate. Before October 2010 the adult rate applied to workers age 22 and above. Since then it also applies to workers age 21.

This step change in individuals’ entitlements when they become entitled to the higher rate provides an important insight into the employment impacts of higher minimum wages. Specifically, the research uses a regression discontinuity approach that compares employment outcomes for individuals around this age threshold. In this framework, changes in employment for individuals who are a few months younger and older than 22 years provide an estimate of the employment effect of the legislated wage increase.

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