Efficiency wages and the economic effects of the minimum wage
By: Andreas  Georgiadis.
Contributors: London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper -- no. 857
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2008
Place of publication: London
Language: eng
Format: Electronic resource
Description: We exploit a natural experiment provided by the 1990 introduction of the UK National Minimum Wage (NMW) to investigate the relationship between wages and monitoring and to test for Efficiency Wages considerations in a low-wage sector, the UK residential care homes industry. Our findings seem to support the wage-supervision trade-off prediction of the shirking model, and that employers didn't dissipate minimum wage rents by increasing work intensity or effort requirements on the job. Estimation results suggest that higher wage costs were more than offset by lower monitoring costs, and thus the overall evidence imply that the NMW may have operated as an Efficiency Wage. These findings support Efficiency Wage models used to explain a non-negative employment effect of the Minimum Wage and provide an explanation of recent evidence from the care homes sector that although the wage structure was heavily affected by the NMW introduction, there were moderate employment effects.
Notes: Title from PDF file (viewed on Oct. 10, 2008).

"February 2008."

Includes bibliographical references.

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