Minimum Wages and Employment : A Theoretical Framework with an Application to the UK Wages Councils

Presents a theoretical approach to analysing the effects of minimum wages on employment which is intended to conform more with the functioning of actual labour markets than do other popular models traditionally used to analyse the likely effects of minimum wages on employment. The model has the desirable property of not only allowing for the negative effect predicted by conventional models, but also permiting a non‐negative impact which is consistent with several recent empirical pieces of work. Examines the employment effects of the industry‐level system of minimum wages which operated in the UK until September 1993. Results reported are not in line with the orthodox model as they suggest a neutral or positive impact of Wages Council minimum wages on employment between 1978 and 1990.