Exploiting the Irish Border to Estimate Minimum Wage Impacts in Northern Ireland

Duncan Mcvicar,Andrew Park,Seamus Mcguinness

doi:10.2478/izajole-2019-0002

Duncan Mcvicar, Andrew Park + Show 1 more

Open Access

https://doi.org/10.2478/izajole-2019-0002

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Abstract

Abstract This paper examines the impacts of the introduction of the UK National Minimum Wage (NMW) in 1999 and the introduction of the UK National Living Wage (NLW) in 2016 in Northern Ireland (NI) on employment and hours. NI is the only part of the UK with a land border where the NMW and NLW cover those working on one side of the border but not those working on the other side of the border (i.e., Republic of Ireland). This discontinuity in minimum wage coverage enables a research design that estimates the impacts of the NMW and NLW on employment and hours worked using difference-in-differences estimation. We find a small decrease in the employment rate of 22–59/64-year-olds in NI, of up to 2% points, in the year following the introduction of the NMW, but no impact on hours worked. We find no clear evidence that the introduction of the NLW impacted either employment or hours worked in NI.

Highlights

The question of whether minimum wages, and minimum wage increases, lead to falls in employment and/or hours worked continues to attract significant interest among both policy makers and researchers
One potential explanation for this divergence, which we explore is that it is picking up a negative employment impact of the National Minimum Wage (NMW) in Northern Ireland (NI) against a counterfactual increasing trend
This paper presents estimates of employment and hours impacts in NI of the introductions of the UK NMW and National Living Wage (NLW), using the Republic of Ireland (RoI) – where minimum wages were not introduced until 2000Q2 and were constant at the time of the introduction of the NLW – to generate the relevant counterfactuals in each case

Summary

DISCUSSION PAPER SERIES

Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. Supported by the Deutsche Post Foundation, IZA runs the world’s largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author

INTRODUCTION

EXISTING RESEARCH

DATA AND APPROACH TO ESTIMATION

Findings

DIFFERENCE-IN-DIFFERENCES ANALYSIS

CONCLUSIONS