Chapter 7: Monitoring the effects of minimum wages

7.1 The importance of monitoring

Enough resources should be allocated for monitoring the effects of minimum wages

Monitoring the effects of minimum wages is a key element of an evidence-based minimum wage system. Findings from rigorous impact assessment studies should find their way back to Governments and social partners, and inform subsequent rounds of adjustment or changes to the system. Enough resources should therefore by allocated to study the effects of minimum wages.

The U.K. Low Pay Commission, for example, has in the last few years allocated substantial amount of resources to commissioning research projects, analyse relevant data and actively encourage the Office of National Statistics to establish better estimates of the incidence of low pay, carry out surveys of firms in low-paying sectors, and make fact-finding visits throughout the UK to meet employers, employees and representative organisations.1

Recent research projects in the U.K. have for example covered issues such as:
  • The impact of minimum wages on earnings, employment and hours
  • How the minimum wage changed consumption, savings and debt behaviour
  • The impact of the minimum wage on productivity and training
  • The imapct of the minimum wage on the gender pay gap
  • The impact of the minimum wage on young people
  • The impact of the minimum wage on businesses and low-paying companies
  • How the minimum wage interacts with the taxes and benefits system
  • The impact of the minimum wage on pay settlements
  • The nature of non-compliance
All this research has helped the members of the Low Pay Commission in their deliberations and recommendations on annual rate adjustments.

Using different methodologies

Current empirical research is notably varied in methods, data and measures, especially in contrast with earlier research on the subject. Because the choice of methodology can have an effect on results that are obtained, it is important to carry out a critical mass of studies using a variety of methodologies.