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CentrePiece article
Care homes: effects of the National Living Wage
Giulia Giupponi and Stephen Machin
July 2018
Paper No' CEPCP529:
Full Paper (pdf)

CentrePiece 23 (2) Summer 2018

JEL Classification: J23; J31

Tags: minimum wage structure; employment; wage spillovers

The National Living Wage, which was introduced in 2016, has substantially raised wages at the bottom of the hourly wage distribution in care homes in England, a sector that employs a large number of low-paid workers. According to research by Giulia Giupponi and Stephen Machin, wages have increased with few adverse effects on employment and hours worked. But their study also finds that the margin of adjustment that care home providers have used to offset higher wage costs appears to be the quality of care services. Firms’ responses to higher wage costs raise concerns about the ability of the care home industry to meet fundamental standards of quality and safety.

This article summarises ‘Changing the Structure of Minimum Wages: Firm Adjustment and Wage Spillovers’ by Giulia Giupponi and Stephen Machin, CEP DP No.1533, April 2018.