Rarely do we get a chance for something close to a natural experiment in the social sciences and the introduction of the national minimum wage legislation in the UK in 1999 is not one such example (no control group). But is nonetheless an interesting case.
As everyone knows most economists (less so than before but I would guess still a majority) think that minimum wages reduce employment. Indeed in the canonical model increasing the minimum wage decreases the demand for labour with the result being unemployment. For anyone who has not of yet had that model force fed to them in an econ 101 class here it is in all its graphic detail.
I am not going to do the walk through. Clearly the increase from the equilibrium wage (Ew) to the minimum wage (Mw) causes unemployment.
So much for theory lets take a look at what happened in the UK after the introduction of their first ever national minimum wage in 1999.
NMW in the graph above is the national minimum wage laws. Each of three plotted lines tracks a different age cohort of the labour market. Anyway what is the take away. For all groups unemployment decreased after the introduction of the minimum wage law. So what do the other two vertical dashed lines represent. S-11 is the terrorist attacks and the GFC is the attack of finance aka the great financial crisis.
Moral of the story: terrorists and bankers kill jobs minimum wages do not. At least not in the UK anyway.
Ah, but then Travis we here in BC are the furtherst from the UK in Canada so we CAN have the lowest minimun wage in the country it seems by that study. Unfortunately we DO in fact have the lowest minimum wage in Canada.
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I must point out that the Minimum Wage applies to all of Britain, not just England — please don’t confuse the two (it is a bit like calling Canadians Americans). So, it is a case of “Just ask the British…” particularly as it is the UK figures in the graph.
My post says that. The title was for effect.