1. WHAT IMPACT SHOULD WE EXPECT FROM THE MINIMUM WAGE? Adair Turner Policy Studies Institute 2nd December 2002

2. 1 Expectations and Fears For Alleviation of in-work poverty Encourage higher value focus investment, training, productivitiy Against Loss of competitiveness destruction of jobs

3. 2 Employment and Unemployment 1992-2002 Source: Labour Force Survey

4. 3 Beneficiaries of the NMW: Third Report Estimates Source: LPC Third Report

5. 4 Minimum Wage and Average Earnings April 1999-October 2002 Source: ONS Average Earnings Index Headline Rate Note: Increase in AEI headline is to September 2002

6. 5 Possible Effects Redistribution through higher prices Redistribution but with reduction in sectoral demand Redistribution through lower margins Redistribution resisted - differentials restored Productivity enhancement –Capital/labour substitution –Training –Work elimination (service redefinition) Loss of external competitiveness

7. 6 Conditions for different effects

8. 7 First and subsequent order employment effects

9. 8 Percentage of Adult Jobs Paid Below £4.30 per hour, April 2002 Source: Grossed NES data, 2002

10. 9 Number of Adult Jobs Paid Below £4.30 per hour, April 2002 Source: Grossed NES data, 2002 Low-paying sectors account for 56 per cent of all adult jobs paid below £4.30

11. 10 Total Employee Jobs in Low-paying Sectors June 2002 Source: ONS Low-paying sectors account for 22 per cent of all employee jobs

12. 11 Employee Jobs in Retailing Source: ONS

13. 12 Effect, Conditions and Applicability: Retail Sector

14. 13 Operating Surplus as % of Output by Sector 1998-2000 Source: ONS Blue Book

15. 14 Corporations Gross Operating Surplus as % GDP and GDP Growth 1980-2002 Source: ONS Economic Trends

16. 15 Increases in Hourly Earnings for Employees Aged 18 and over, 2001-2002 Source: Grossed NES April 2001-2002

17. 16 Difference in Hourly Earnings Increases versus Median by Percentile 2000-2002 Source: Grossed NES April 2000-2002 £5.70ph

18. 17 Difference in Hourly Earnings Increases Compared with Median by Percentile 1998-2002 Source: Grossed NES April 1998-2002 £5.00ph

19. 18 Difference in Hourly Earnings Increases versus Median by Percentile: Low-paying sectors 2000-2002 Source: Grossed NES April 2000-2002 £5.00 per hour

20. 19 Employee Jobs in Hospitality Source: ONS

21. 20 Effect, Conditions and Applicability: Hospitality Sector

22. 21 Impact of October 2001 increase – firms reporting increased use of new technology/processes: % Source: LPC Postal Survey

23. 22 Employee Jobs in Social Care Source: ONS

24. 23 Effect, Conditions and Applicability: Social Care

25. 24 Impact of October 2001 increase – firms reporting a decrease in profits: %

26. 25 Registered Nursing Beds in Nursing Homes, 1995/6 to 2001, England Source: Department of Health

27. 26 Employee Jobs in Cleaning Source: ONS

28. 27 Effect, Conditions and Applicability: Cleaning

29. 28 Employee Jobs in Textiles and Clothing Source: ONS

30. 29 Effect, Conditions and Applicability: Textiles and Clothing

31. 30 Impact of 2001 NMW Increase on Training Provision Provided training in past 3 years Increased Training Decreased Training No Change Workers aged 16-1782171569 Workers aged 18-2188171370 Workers aged 22 or over84161371 Source: LPC Postal Survey Note: Base, all firms affected by the October 2001 increase in the National Minimum Wage in any way, and employing workers in the relevant age group at the time of the survey, and providing training to their staff (final three columns only). % of affected firms which:

32. 31 Some Conclusions?

33. 32 Gains for Working Age Households, from Minimum Wage and Tax Credits 1997 - 2001 Source: HM Treasury

34. 33 Optimal Redistribution Approach