The National Minimum Wage and the Substitutability Between Young and Old Workers in Low Paid Occupations

Gauthier Lanot, Panos Sousounis

Research output: Contribution to journalArticlepeer-review

Abstract

We study the effect of the National Minimum Wage (NMW) on the workforce age composition within the low paying sectors of the British economy. Our interest is in the degree of substitutability between labour inputs (young and old employees). We find evidence that both the introduction and the regular upratings of the NMW have a significant effect on the observed changes to the relative wages and to the relative wage bills but not to relative employment. We estimate the elasticity of substitution, between ‘young’ age groups and older workers (55+) to be zero, while that of ‘prime’ (22+) age and older workers, to be around 0.79. Our estimates therefore imply significant complementarity between younger and old employees.
Original languageEnglish
Pages (from-to)601-633
Number of pages33
JournalThe Manchester School
Volume85
Issue number5
Early online date18 Jul 2016
DOIs
Publication statusPublished - Sept 2017

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