Does the UK Minimum Wage Reduce Employment? A Meta‐Regression Analysis
| Date | 01 September 2014 |
| Author | Megan Linde Leonard,Hristos Doucouliagos,T. D. Stanley |
| DOI | http://doi.org/10.1111/bjir.12031 |
| Published date | 01 September 2014 |
Does the UK Minimum Wage
Reduce Employment? A
Meta-Regression Analysis
Megan de Linde Leonard, T. D. Stanley and
Hristos Doucouliagos
Abstract
The employment effect from raising the minimum wage has long been studied
but remains in dispute. Our meta-analysis of 236 estimated minimum wage
elasticities and 710 partial correlation coefficients from 16 UK studies finds no
overall practically significant adverse employment effect. Unlike US studies,
there seems to be little, if any, overall reporting bias. Multivariate meta-
regression analysis identifies several research dimensions that are associated
with differential employment effects. In particular, the residential home care
industry may exhibit a genuinely adverse employment effect.
1. Introduction
There is a long and rich tradition of investigating the employment conse-
quences of a government mandated minimum wage (Card and Krueger
1995a; Lovell 1972; Mincer 1976; Moore 1971; Neumark and Wascher 2008;
Welch 1976). A decrease in employment is the clear implication of the theory
of the firm and profit maximization under competition. Few economic rela-
tions are more strongly held or more vigorously defended than the adverse
employment consequence of a rise in the minimum wage. ‘(I)n the past,
studies were divided between those estimating large employment losses and
those estimating small losses’ (Machin and Manning 1994: 320). Since the
early 1990s and the contributions of several scholars, including Card and
Krueger (1995a) for the United States, and Machin and Manning (1994) for
the UK, ‘the focus now is on whether minimum wage laws have negative
effects or no effects on employment (Machin and Manning 1994: 320).
Megan de Linde Leonard and T. D. Stanley are at the Department of Economics and Business,
Hendrix College. Hristos Doucouliagos is at the School of Accounting, Economics and Finance,
Deakin University.
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British Journal of Industrial Relations doi: 10.1111/bjir.12031
52:3 September 2014 0007–1080 pp. 499–520
© John Wiley & Sons Ltd/London School of Economics 2013. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
In 2009, the British Journal of Industrial Relations devoted a special issue to
the history, effectiveness and consequences of the first century of minimum
wage laws in Britain (Deakin and Green 2009). One article offered a com-
prehensive and statistically rigorous assessment of all the empirical estimates
of the employment effects of the minimum wage in the United States
and found no evidence of a practically meaningful adverse employment
effect attributable to the minimum wage (Doucouliagos and Stanley 2009).
Reported evidence of such an adverse effect is shown to be the result of what
is called ‘publication selection’ or reporting bias. These findings are shown
to be remarkably robust and even remain if the reviewer were to ignore
hundreds of positive minimum wage employment elasticities reported in this
research literature.
None the less, it remains to be investigated whether this clear finding of
no employment effect applies to the UK minimum wage law as well. The
purpose of this article is to provide a comprehensive systematic review and
meta-analysis of all the empirical estimates of the employment effect of
raising the minimum wage in the UK. When 710 estimates from 16 studies are
combined and statistically analysed, no evidence of an overall adverse
employment effect can be found for the British minimum wage. However,
there is evidence that the residential home care industry is more adversely
affected by minimum wage increases. Unlike US research, no evidence of any
aggregate reporting bias is found in the UK literature.
2. Meta-regression analysis (MRA)
Meta-analysis refers to the statistical analysis of a large collection of results from
individual studies for the purpose of integrating the findings. It connotes a rigorous
alternative to the casual, narrative discussions of research studies that typify our
attempt to make sense of the rapidly expanding research literature (Glass 1976: 3).
Meta-analysis is a type of systematic review that employs a full range of
statistical methods to summarize and help researchers understand, deeply,
what an entire empirical literature means. Systematic reviews are distin-
guished from conventional narrative reviews in that they require that all
research results be included and identified through an explicit and compre-
hensive search strategy. MRA is a regression analysis of previously published
regression analyses. ‘(M)eta-regression analysis is a form of meta-analysis
especially designed to investigate empirical research in economics’ (Stanley
2001: 131). By now, many hundreds of MRAs of economics research have
been published (Nelson and Kennedy 2009; Roberts and Stanley 2005;
Stanley and Doucouliagos 2012).
MRA is designed to model the effects of observed econometric spe-
cifications. Its central objective is to directly estimate the associated
misspecification biases, and thereby filter out these potential distortions from
our empirical knowledge (Stanley and Jarrell 1989). MRA is a systematic and
comprehensive review of all comparable econometric findings. It models any
500 British Journal of Industrial Relations
© John Wiley & Sons Ltd/London School of Economics 2013.
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