The Effects of Minimum Wage Policy on the Long‐Term Care Sector in England

Abstract

AbstractThe increase in the National Minimum Wage rate in October 2015 and the introduction of the National Living Wage in April 2016 led, in a short period of time, to an aggregated increase in the wage floor of over 10 per cent for workers in England aged 25 and over. The long‐term care (LTC) sector is a labour intensive, low pay sector, and as such, can be substantially affected by changes in minimum wage. We assessed the effects of this exogenous wage increase on independent LTC providers by looking at effects on wages, employment, weekly hours, and employment contracts. Using data from the Adult Social Care Workforce Data Set (ASC‐WDS) and applying a ‘before‐after’ analysis, we found that the substantial increase in minimum wage had a strong and positive effect on wages in the LTC sector, but with substantial compression of the wage distribution at the lower end. Although, as in other studies, the employment effect was rather elusive, we found that for care homes this can be partially explained by a negative effect on total weekly hours. We also found positive but short‐term effects on employment without guaranteed working hours (i.e. zero‐hour contracts) for both residential and domiciliary care.