1. Measuring non-compliance with the minimum wage (or: Looking at secondary data)
Hilary Drewa, Felix Ritchiea, Michail Veliziotisb, Damian Whittarda
a University of the West of England, Bristol
b University of Southampton
Assume first session has covering stylised facts about what we currently know about non-compliance

2. Why non-compliance? Important for policy Statistically sensitive
particularly in Europe
(non-compliance v small)
ish

3. Why non-compliance?

4. Two separate problems Understanding the causes of non-compliance
Distinguishing genuine non-compliance from measurement issues
our interest today
How confident can we be in the evidence?
What tools/techniques give us confidence?

5. Measuring non-compliance in the UK
Employee
£wages
Interest is left-hand side, derived from right-hand side – problem is the confidence we have in the middle bits.
Employer

6. Measuring non-compliance in the UK
Employee
Apprentice Pay Survey
BIS
Labour Force Survey
£wages
ONS
Annual Survey of Hours and Earnings
Interest is left-hand side, derived from right-hand side – problem is the confidence we have in the middle bits.
Employer

7. Measuring non-compliance in the UK
Employee
Apprentice Pay Survey
BIS
Labour Force Survey
£wage rate
£wages
£wages
ONS
Annual Survey of Hours and Earnings
Interest is left-hand side, derived from right-hand side – problem is the confidence we have in the middle bits.
Employer

8. Stages in measuring compliance
Employers decide what to pay workers
What we want to know

9. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
What we also want to know

10. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
The best we can do for gathering evidence

11. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
What we actually observe

12. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
Data are processed into suitable measures
What we do to clean up the data we observe

13. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
Data are processed into suitable measures
Data are weighted
What we do to make the data representative

14. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
Data are processed into suitable measures
Data are weighted
Compliance is calculated
How we create a target measure

15. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
Data are processed into suitable measures
Data are weighted
Compliance is calculated
Inferences are drawn
How we interpret the results

16. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
Data are processed into suitable measures
Data are weighted
Compliance is calculated
Inferences are drawn
Policy decisions are made
How we react

17. Stages in measuring compliance
Employers decide what to pay workers
Employers pay workers
A subset of worker-employer interactions are sampled
Hours and earnings information is gathered
Data are processed into suitable measures
Data are weighted
Compliance is calculated
Inferences are drawn
Policy decisions are made
All of this has to work!

18. Problems (for today)
Distinguishing genuine non-compliance from measurement issues
data collection
data quality
data processing

19. Problems: data collection
When do you collect your data?
Annual surveys: good timing?
For minimum wage, exogenous dates
Quarterly LFS provides information

20. Problems: data collection
Who do you get data from?
are you getting the right sort of respondents?

21. Problems: data collection
Who do you get data from?
are you getting the right sort of respondents?
usual ASHE sampling rate ~ 0.75%

22. Problems: data collection
Who do you get data from?
are you getting the right sort of respondents?
will you get honest responses?
some (weak) anecdotal evidence: no, ish
but knowledge is more relevant than malice

23. Problems: data collection
Who do you get data from?
are you getting the right sort of respondents?
will you get honest responses?
will you get accurate responses?

24. Problems: quality of input data

25. Problems: quality of input data

26. Problems: quality of input data

27. Problems: quality of input data
Do people understand the survey?

28. Problems: quality of input data
Do people understand the survey?
mostly
but LFS/ASHE/APS all show evidence of specific failure of understanding

29. Problems: quality of input data
Do people have the knowledge to provide quality data?
LFS and ASHE: mostly
APS: in some professions, mostly not

30. Problems: processing

31. Problems: processing

32. Problems: processing

33. Problems: processing

34. How confident are we? LPC* Us All workers Apprentices
ASHE lower bound but accurate for observed
LFS best estimate for non-ASHE subgroups
LFS predictably inaccurate for larger groups only
Apprentices
ASHE under-estimate
APS accurate
ASHE lower bound
APS over-estimate but closer
* our view of what LPC thinks…

35. Summary: understanding secondary data creation matters
detective work, not econometrics
simple descriptives very helpful
comparative and qualitative data helpful
sampling & processing & q. design
talk to data providers
Natural constraints highlight problems