Measuring compliance with minimum wages

Abstract

Identifying genuine underpayment of minimum wages is not straightforward. Some well-known statistical issues affect the measurement of compliance rates, but factors such as processing or behavioural influences amongst respondents can also have an impact. We study the quantitative measurement of non-compliance with the minimum wage, using UK apprentices (who have particularly high non-compliance rates) as a case study. We show that understanding the institutional and behavioural context can be invaluable, as can triangulation of different sources. While the binary nature of compliance makes such problems easier to identify and evaluate, this analysis holds wider lessons for the understanding of the characteristics of large and complex datasets.

Calculating Gross Hourly Wages – the (Structure of) Earnings Survey and the German Socio-Economic Panel in Comparison

“…Since paying below the minimum wage is an offence, employers may not want to submit such low wages and they may adjust their data before reporting (Garnero et al 2015). Another question is, why employers paying below minimum wages should respond to voluntary official surveys like the ES 2015 (Ritchie et al 2016(Ritchie et al , 2018. Hereafter both surveys exhibit specific problems in the collection of data on working hours and the calculation of hourly wages.…”

“…Hereafter both surveys exhibit specific problems in the collection of data on working hours and the calculation of hourly wages. Against this backdrop, qualitative studies could help to gain further insights in frame conditions and provide corroboration or denial for the quantitative studies (Ritchie et al 2016(Ritchie et al , 2018.…”

“…Additionally, information concerning earnings and working hours differ depending on the specific data sets. Research conducted in Great Britain (Williams 2004;Fry/Ritchie 2012;Ritchie et al 2014Ritchie et al , 2016Ritchie et al , 2018le Roux et al 2013) has shown how important it is to know about the strengths and weaknesses of the various data sets when researching income and working hours with respect to minimum wages. For Germany, comparable studies are currently not available.…”

Incentives to Comply with the Minimum Wage in the US and UK

“…Firms may fail to raise pay when a worker ages into a new band, or may pay the apprentice minimum wage in incorrect circumstances. Examples of disguised minimum wage underpayment in different industries can be found in Warhurst et al (2008), Rubery et al (2011), Hussein (2011), Ipsos Mori (2012), Pennycook (2013), HMRC (2013), BIS (2014), Gardiner (2015), Clark and Herman (2017), Ritchie et al (2017), Kik et al (2019aKik et al ( , 2019b, and López-Andreu et al (2019).…”

“…Using the Low Pay Commission's estimates of the prevalence of minimum wage underpayment, I estimate that in April 2018, between 10,960 and 94,490 firms were underpaying the minimum wage. 17 This is almost surely an underestimate for two reasons: first, this comes from an employer survey so it excludes intentional underpayment or the informal economy (Metcalf 2008, Ritchie et al 2017, and second, it covers only one month of the year and some firms may underpay in other months. HMRC identified 1,456 firms underpaying the minimum wage in fiscal year 2018/19.…”