The impact of a minimum wage change on the distribution of wages and household income

Abstract

We use distribution regression analysis to study the impact of a 6% increase in the Irish minimum wage on the distribution of hourly wages and household income. Wage inequality, measured by the ratio of wages in the 90th and 10th percentiles and the 75th and 25th percentiles, decreased by approximately 8 and 4%, respectively. The results point towards wage spillover effects up to the 30th percentile of the wage distribution. We show that minimum wage workers are spread throughout the household income distribution and are often located in high-income households. Therefore, while we observe strong effects on the wage distribution, the impact of a minimum wage increase on the household income distribution is quite limited.

The Gender Pay Gap in Ireland from Austerity Through Recovery

“…SeeBargain et al (2019) andRedmond et al (2020) for recent applications of this method to the effect of the minimum wage on the gender wage gap and on wage inequality.…”

Gender and labour market inclusion on the island of Ireland

“…The nominal hourly minimum wage level is somewhat higher in Northern Ireland than in Ireland (IE) (Table 2.1). However, research (Redmond et al, 2021) has shown that only a small proportion of workers are at this level (6.8% to 10.6% in IE in 2022 ; 8% in NI [Francis-Devine, 2023]). Later chapters will look at the actual distribution of earnings by gender in the two jurisdictions.…”

https://www.esri.ie/publications/poverty-income-inequality-and-living-standards-in-ireland-third-annual-report

“…Indeed, Appendix Table B.1 shows that only a quarter of those in the lowest quintile of individual earnings were also in the lowest quintile of equivalised household disposable income, with a quarter also located in the highest two income quintiles. The reason for this is largely because many low earners have a higher earning partner or spouse, placing them in the middle or even the top of the distribution of household disposable income despite low levels of individual pay (Redmond et al, 2021). It is for this reason that increases in the minimum wage have been described as a 'blunt instrument' for boosting the incomes of those at the bottom of the income distribution (Dorris et al, 2022;Redmond, 2020;Low Pay Commission, 2018).…”

“…It is for this reason that increases in the minimum wage have been described as a 'blunt instrument' for boosting the incomes of those at the bottom of the income distribution (Dorris et al, 2022;Redmond, 2020;Low Pay Commission, 2018). While limited in terms of its effect on low incomes, minimum wage policy has an important role in counteracting forces acting to increase earnings or wage inequality (Holton and O'Neill, 2017;Redmond et al, 2021), reducing the gender pay gap (Bargain et al, 2019) or limiting the extent to which employers with market power are able to capture gains from in-work transfers like the Working Families Payment (Joyce and Zilliak, 2020).…”