Minimum Wage and Staying-on Rates in Education for Teenagers in the UK

Augustin de Coulon 1, Elena Meschi2, Jonathan Wadsworth3
1King's College London, UK, 2Institute of Education, London, UK, 3Royal Holloway, University of London, UK

This paper assesses the impact of the introduction of the NMW for 16-17 year olds on the decisions made by young people at age 16 to stay-on in full time education (FTED) or enter the labour market. We investigate whether there is evidence of any changes in education participation rates following the introduction of the NMW for 16-17 years old in October 2004. Using the Local Authorities as local labour markets, we implement a "diff in diff" approach to compare the evolution of ”staying on” rates in low and high wage LAs that are differently affected by the introduction of NMW. In low wage regions, a large proportion of employees are affected by the introduction of a minimum wage, whereas in high wage regions a far lower proportion is affected. We found no evidence of reduced participation amongst youths in low wage LAs compared to high wage LAs. We also found no evidence that the large (10%) increase in the NMW that happened in 2006 had any impact either. The decision to “stay on” for 16 years olds does not seem to be affected by the higher wages induced by the introduction of NMW for 16-17 year olds in 2004. This results is found despite large increase in wages paid to teenagers in low wage regions. It contradicts other papers that found large detrimental effect of minimum wage on participation to education.

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