The Impact of a Rising Wage Floor on Labour Mobility across Firms

Abstract

In April 2016, the National Living Wage (NLW) raised the statutory wage floor for employees in the UK aged 25 and above by 50 pence per hour. This uprating was almost double any in the previous decade and expanded the share of jobs covered by the wage floor by around 50 per cent. Using a difference-indifferences approach with linked employer-employee data from the UK's Annual Survey of Hours and Earnings, we examine how the introduction and uprating of the NLW affected the likelihood of minimum-wage employees changing firms. We find some evidence that the NLW reduced the rate of job-to-job transitions among such workers, consistent with predictions that an increase in the wage floor discourages job search. However, we find no evidence that the NLW affected differences in job mobility between minimum wage workers and their co-workers in the same firm. Together, these findings suggest that the increased wage floor made quits less attractive to minimum-wage workers in firms with limited opportunities for progression.