The government asked Professor Arindrajit Dube to consider international evidence on the impacts of minimum wages and the implications for UK policy.
Professor Dube’s report reviews the international evidence on the impacts of minimum wages, as well as recent research documenting the impact of the National Living Wage (NLW) in the UK. The report finds that, overall, the most up to date body of research from US, UK and other developed countries points to a very muted effect of minimum wages on employment, while significantly increasing the earnings of low paid workers. Importantly, this was found to be the case even for the most recent ambitious policies.
The report concludes that, based on the overall weight of the available evidence, there is room for exploring a more ambitious NLW remit in the UK in the coming years, in the range of 60% to two-thirds of median hourly earnings. However, the report also concludes that given that the evidence base is still developing, it would also be prudent to accompany more ambitious minimum wages with a clear mandate that the Low Pay Commission can use to implement, evaluate and recalibrate any proposed changes to the NLW, thereby designing in responsiveness to any unforeseen impacts if required. To assist this, it recommends that government should look to improve the evidence base and the quality of data used in assessing the impact of minimum wages.