C15 Lectures, 2004/5, Stephen Machin
1). Minimum Wages and Economic Outcomes
The conventional view in economics is that the imposition of a minimum wage floor damages the
economic position of those it sets out to help. By pricing working out of jobs the minimum wage floor
results in higher unemployment, particularly in low wage labour markets. Moreover, it is argued,
minimum wages have no role in alleviating poverty and may even raise income inequality. Empirical
evidence in line with these propositions has been accumulated over the years from a number of
macroeconomic time series studies, usually based on US data.
More recent microeconomic work, from both Britain and America, has questioned these findings, and
indeed the methodology that underpins them. Recent before-and-after analyses of minimum wage hikes
in the United States, analysis of the system of minimum wages that used to operate in Britain prior to
abolition in 1993 (the Wages Councils) and analysis of the introduction of the UK minimum wage in
April 1999 fail to find any evidence of serious disemployment effects due to minimum wage increases.
There is, however, some evidence that this is true only up to a point, in that a very high minimum wage
is likely to displace workers.
The course will study these issues in some detail, focussing on the way in which economists model
minimum wages, on how they evaluate their impact on economic outcomes and link to the policy debate
on minimum wages (especially issues to do with its introduction to the UK labour market).
Issue to be considereds:
Economic models of minimum wages
Minimum wages and employment
The introduction of the UK National Minimum Wage
2). Intergenerational Mobility
The extent to which a person’s economic or social status is correlated with that of their parents has been
the subject of a large body of social science research for many years. The extent of this correlation is
often referred to as the extent of intergenerational mobility. A more mobile society has weaker links
between economic and social status across generations than does a less mobile society.
There are many conceptual questions that need to be considered in accurately gauging the extent of
intergenerational mobility and these will be considered in this course. The course will also discuss
estimates of how much mobility (or immobility) exists across generations, both in the UK and abroad.
Issues to be considered:
Defining intergenerational mobility
Measuring intergenerational mobility in economic and social status
Estimates of the extent of intergenerational mobility
International comparisons
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Basic Readings:
Minimum Wages
Brown, Charles (1999) Minimum Wages, Employment, and the Distribution of Income, Chapter 32 in
Orley Ashenfelter and David Card (eds.) Handbook of Labor Economics, North Holland Press.
Brown, Charles, Curtis Gilroy and Andrew Kohen (1982) The effect of the minimum wage on
employment and unemployment, Journal of Economic Literature, 20, 487-528.
Card, David and Alan Krueger (1994) Minimum wages and employment: A case study of the fast food
industry in New Jersey and Pennsylvania, American Economic Review, 84, 772-793.
Dickens, Richard, Stephen Machin and Alan Manning (1999) The Effects of Minimum Wages on
Employment: Theory and Evidence From Britain, Journal of Labor Economics, 17, 1-22.
Machin, Stephen, Alan Manning and Lupin Rahman (2003) Where the Minimum Wage Bites Hard: The
Introduction of the UK National Minimum Wage to a Low Wage Sector, Journal of the
European Economic Association, 1, 154-80.
Metcalf, David (1999) The Low Pay Commission and the National Minimum Wage, Economic Journal
Features, 109, F46-F66.
Stewart, Mark (2003a) The Impact of the Introduction of the UK Minimum Wage on the Employment
Probabilities
of
Low
Wage
Workers,
available
at
http://www2.warwick.ac.uk/fac/soc/economics/staff/faculty/stewart/wp/, forthcoming Journal
of the European Economic Association.
Stewart, Mark (2003b) Estimating the Impact of the Minimum Wage Using Geographical Wage
Variation, Oxford Bulletin of Economics and Statistics, 64, 567-82.
Special Issue of Oxford Bulletin of Economics and Statistics (2003) Evaluating the Impact of the UK
National Minimum Wage.
Intergenerational Mobility
Blanden, Jo, Alissa Goodman, Paul Gregg, and Stephen Machin (forthcoming) ‘Changes in
Intergenerational Mobility in Britain’, Miles Corak (ed.) Generational Income Mobility in North
America and Europe, Cambridge University Press.
Dearden, Lorraine, Stephen Machin and Howard Reed (1997), 'Intergenerational Mobility in Britain',
Economic Journal, 107, pp. 47-64.
Galton, Francis (1886), ‘Regression towards mediocrity in hereditary stature’, Journal of the
Anthropological Institute of Great Britain and Ireland, 15, pp. 246-263.
Solon, Gary (1999) ‘Intergenerational Mobility in the Labor Market’, in Orley Ashenfelter and David
Card (eds.) Handbook of Labor Economics, Volume 3A, North Holland.
Solon, Gary (2003) ‘Cross-Country Differences in Intergenerational Earnings Mobility’, Journal of
Economic Perspectives, 16, 59-66.
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