Exploiting the Irish Border to Estimate Minimum Wage Impacts in Northern Ireland

Duncan McVicar; Andrew Park; Seamus McGuinness

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Exploiting the Irish Border to Estimate Minimum Wage Impacts in Northern Ireland

Duncan McVicar

Andrew Park

and

Seamus McGuinness

| Jul 17, 2019

IZA Journal of Labor Economics

Volume 8 (2019): Issue 1 (June 2019)

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DOI: https://doi.org/10.2478/izajole-2019-0002

Keywords
minimum wages, Northern Ireland, employment, hours

© 2019 Duncan McVicar, Andrew Park, Seamus McGuinness published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 Public License.

Difference-in-differences estimates of impacts of the NLW introduction on employment and hours in NI, coefficients (robust standard errors)

	Employment	Weekly hours
Constant treatment effect (2016Q2–2016Q3)	-0.001 (0.010)	-0.011 (0.011)
Quarter-by-quarter estimates
2015Q4 (pre-NLW)	Ref. case	Ref. case
2016Q1 (pre-NLW)	-0.002 (0.014)	-0.009 (0.016)
2016Q2 (post-NLW)	-0.005 (0.014)	-0.009 (0.015)
2016Q3 (post-NLW)	0.0004 (0.014)	-0.023 (0.015)
Nobs	91,393	61,551

Full difference-in-differences estimates of impacts of the NMW introduction on employment and hours in NI, coefficients (standard errors)

	Employment	Weekly hours
NI × post	-0.019*** (0.006)	-0.006 (0.007)
NI	0.009** (0.004)	-0.024*** (0.005)
1998Q3	0.005* (0.003)	0.015*** (0.003)
1998Q4	0.011*** (0.003)	-0.014*** (0.003)
1999Q1	0.018*** (0.003)	-0.014*** (0.003)
1999Q2	0.024*** (0.003)	-0.009*** (0.003)
1999Q3	0.030*** (0.003)	0.013*** (0.003)
1999Q4	0.035*** (0.003)	-0.008*** (0.003)
2000Q1	0.038*** (0.003)	-0.023*** (0.003)
Age	0.029*** (0.001)	0.003*** (0.001)
Age²	-0.0005*** (0.00001)	-0.00006*** (0.00001)
Male	0.263*** (0.001)	0.350*** (0.002)
Number of children <18 years in household	-0.044*** (0.001)	-0.019*** (0.001)
Married	0.044*** (0.002)	-0.037*** (0.002)
Divorced	-0.018*** (0.004)	-0.096*** (0.005)
Widowed	-0.028*** (0.006)	-0.102*** (0.009)
Constant	0.226*** (0.010)	3.42*** (0.011)
R²	0.135	0.146
Nobs	463,647	298,473

Difference-in-differences estimates of impacts of the NMW introduction on employment and hours in NI, coefficients (robust standard errors)

	Employment	Weekly hours
Constant treatment effect (1999Q2–2000Q1)	-0.019*** (0.006)	0.001 (0.007)
Quarter-by-quarter estimates
1998Q2 (pre-NMW)	Ref. case	Ref. case
1998Q3 (pre-NMW)	-0.014 (0.012)	0.001 (0.014)
1998Q4 (pre-NMW)	-0.003 (0.012)	0.007 (0.014)
1999Q1 (pre-NMW)	-0.016 (0.012)	0.020 (0.014)
1999Q2 (post-NMW)	-0.025** (0.012)	0.020 (0.013)
1999Q3 (post-NMW)	-0.023* (0.012)	0.010 (0.014)
1999Q4 (post-NMW)	-0.028** (0.012)	0.011 (0.014)
2000Q1 (post-NMW)	-0.033*** (0.012)	-0.009 (0.013)
Nobs	463,647	282,435

Appendix: Additional Data Details and ResultsVariable definitions and descriptions

Variable	Definition	Description
Outcome variables Employment	Employed in the reference week	Employed in the reference week = 1, 0 otherwise
Employment in minimum wage sector	Those employed in the reference week in sectors with high concentrations of minimum wage workers	Employed in the following sectors: UK SIC07 G, I, and Q = 1, 0 if employed in other sectors*
Total actual weekly hours in main job	Total actual hours worked in main job in the reference week including overtime	This variable is constructed from TTACHR from the QLFS and HWACTUAL from the QNHS
Total usual weekly hours in main job	Total usual hours worked in main job including overtime	This variable is constructed from TTUSHR from the QLFS and HWUSUAL from QNHS
Controls Male Age, years Age squared	Sex of respondent Age of respondent in years Age of respondent in years, squared	Male = 1, female = 0 Age of respondent in years Age of respondent in years, squared
Single	Respondent’s marital status is single	Respondent’s marital status is single = 1, 0 otherwise
Married/cohabiting	Respondent’s marital status is mar- ried/cohabiting	Respondent’s marital status is married/cohabiting = 1, 0 otherwise
Widowed	Respondent’s marital status is wid- owed	Respondent’s marital status is widowed = 1, 0 otherwise
Divorced	Respondent’s marital status is di- vorced	Respondent’s marital status is divorced = 1, 0 otherwise
Number of Children under the age of 18 years in household	Number of children resident in the household	Number of children under the ages of 17 (RoI) and 19 (NI) years, resident in the household
Number of children under the age of 18 years in household missing	Dummy for missing data on the num- ber of children <18 years	Missing =1, 0 otherwise
ISCED 1	Respondent reports highest level of qualification as “no qualifications” or equivalent	ISCED 1 = 1, 0 otherwise.
ISCED 2	Respondent reports highest level of qualification as General Secondary Certificate of Educations (GCSEs) (NI)/ Junior Certificate (RoI) or equivalent	ISCED 2 = 1, 0 otherwise
ISCED 3–4	Respondent reports highest level of qualification as A-level (NI)/leaving certificate (RoI) or equivalent	ISCED 3/4 = 1, 0 otherwise
ISCED 5	Respondent reports highest level of qualification as sub-degree level higher or further education	ISCED 5 = 1, 0 otherwise
ISCED 6	Respondent reports highest level of qualification as degree level or higher	ISCED 6 = 1, 0 otherwise
ISCED missing	Dummy for missing data on highest qualification level	Missing =1, 0 otherwise

Sample means (standard deviations) for outcomes and other observable characteristics, NI and RoI, pre and post the introduction of NLW

	NI		RoI

	2015Q4–2016Q1	2016Q2–2016Q3	2015Q4–2016Q1	2016Q2–2016Q3
Employment rate, 25–59/ 64 years	0.76	0.76	0.73	0.73
Total actual weekly hours in main job	32.5 (16.6)	33.6 (16.7)	35.6 (13.0)	36.8 (12.8)
Total usual weekly hours in main job	37.5 (12.1)	37.6 (12.6)	36.5 (11.6)	36.8 (11.4)
Proportion of employed in minimum wage sector	0.31	0.30	0.32	0.32
Male	0.52	0.50	0.51	0.52
Age, years	43.0 (10.7)	43.1 (10.7)	42.5 (10.4)	42.5 (10.4)
Single	0.30	0.30	0.34	0.35
Married/ cohabiting	0.59	0.58	0.60	0.58
Widowed/ divorced	0.07	0.06	0.06	0.07
Number of children <18 years in household	0.91 (1.12)	0.90 (1.13)	0.97 (1.20)	0.96 (1.20)
ISCED1	0.22	0.22	0.06	0.06
ISCED2	0.22	0.20	0.11	0.12
ISCED3–4	0.22	0.21	0.15	0.15
ISCED5	0.08	0.09	0.13	0.12
ISCED6	0.24	0.26	0.30	0.30
Nobs	3,430	3,832	42,170	41,961

Full difference-in-differences estimates of impacts of the NLW introduction on employment and hours in NI, coefficients (standard errors)

	Employment	Weekly hours
NI × post	-0.001 (0.010)	-0.019 (0.012)
NI	0.040*** (0.007)	0.055*** (0.009)
2016Q1	-0.001 (0.004)	0.035*** (0.006)
2016Q2	0.001 (0.004)	0.059*** (0.006)
2016Q3	0.007* (0.004)	0.061*** (0.006)
Age	0.032*** (0.001)	0.014*** (0.002)
Age²	-0.0004*** (0.00002)	-0.0002*** (0.00002)
Male	0.129*** (0.003)	0.299*** (0.004)
Number of children <18 years in household	-0.038*** (0.001)	-0.029*** (0.002)
Married	0.119*** (0.004)	0.020*** (0.005)
Divorced	-0.006 (0.007)	-0.005 (0.011)
Widowed	-0.021 (0.014)	-0.049** (0.025)
ISCED 6	0.213*** (0.004)	0.079*** (0.005)
ISCED 5	0.161*** (0.005)	0.039*** (0.007)
ISCED 3–4	0.094*** (0.005)	0.019*** (0.006)
ISCED 2	-0.028*** (0.005)	-0.036*** (0.007)
Constant	-0.004 (0.028)	3.02*** (0.038)
R²	0.099	0.085
Nobs	91,393	61,329

Sensitivity analysis, constant treatment effects, coefficients (robust standard errors)

	NMW introduction		NLW introduction

	Employment	Weekly hours	Employment	Weekly hours
Baseline	-0.019*** (0.006)	0.001 (0.007)	-0.001 (0.010)	-0.011 (0.011)
Baseline as logit (marginal effects)	-0.020*** (0.006)	–	-0.0002 (0.011)	–
Exclude 1999Q1	-0.022*** (0.007)	0.006 (0.007)	–	–
Exclude 2015Q4	–	–	-0.00001 (0.012)	-0.007 (0.014)
Exclude 2016Q1	–	–	-0.002 (0.012)	-0.015 (0.013)
Total actual hours	–	-0.005 (0.008)	–	-0.018 (0.012)
Border region only	-0.010 (0.007)	0.006 (0.008)	0.014 (0.013)	-0.011 (0.015)
Estimated with wild bootstrap clustered standard errors (p-value)	-0.019*** (0.002)	0.001 (0.656)	-0.001 (0.600)	-0.011*** (0.002)

Sample means/proportions (standard deviations) for outcomes and other observable characteristics, NI and RoI, pre and post the introduction of NMW

	NI		RoI

	1998Q2–1999Q1	1999Q2–2000Q1	1998Q2–1999Q1	1999Q2–2000Q1
Employment rate, 22– 59/64 years	0.70	0.70	0.69	0.72
Total actual weekly hours in main job	34.6 (18.0)	35.0 (17.9)	40.4 (14.8)	40.1 (14.5)
Total usual weekly hours in main job	39.6 (13.5)	39.5 (13.9)	39.1 (12.7)	38.7 (12.0)
Proportion of employed in minimum wage sector	0.31	0.30	0.26	0.26
Male	0.51	0.51	0.52	0.52
Age, years	40.0 (11.3)	40.2 (11.2)	39.7 (11.3)	39.8 (11.3)
Single	0.27	0.27	0.32	0.33
Married/cohabiting	0.63	0.63	0.62	0.61
Widowed/divorced	0.05	0.05	0.06	0.06
Number of children <18 years in household	1.07 (1.27)	1.04 (1.26)	1.09 (1.32)	1.05 (1.29)
Nobs	11,366	11,552	220,795	219,934

Introduction of NMW and NLW as natural experiments

	Before	After
NMW introduction, 22+ years	1998Q2–1999Q1	1999Q2–2000Q1
NI minimum hourly wage	N/A	£3.60
RoI minimum hourly wage	N/A	N/A
NLW introduction, 25+ years	2015Q4–2016Q1	2016Q2–2016Q3
NI minimum hourly wage	£6.70	£7.20
RoI minimum hourly wage	€8.65 (2015Q4)	€9.15
	€9.15 (2016Q1)

Difference-in-differences estimates of impacts of the NMW and NLW introductions on employment and hours in NI, heterogeneous effects, constant treatment effects, coefficients (robust standard errors; number of observations)

	NMW introduction		NLW introduction

	Employment	Weekly hours	Employment	Weekly hours
Baseline	-0.019*** (0.006) [463,647]	0.001 (0.007) [282,435]	-0.001 (0.010) [91,393]	-0.012 (0.011) [61,551]
Men	-0.020** (0.008) [238,402]	0.005 (0.007) [161,121]	-0.020 (0.013) [46,661]	0.005 (0.012) [32,430]
Women	-0.019** (0.009) [225,245]	-0.006 (0.012) [121,314]	0.018 (0.015) [44,732]	-0.027 (0.018) [29,121]
Age 22–34/ 25–34 years	-0.022** (0.010) [161,846]	0.013 (0.010) [115,105]	-0.005 (0.019) [21,976]	-0.020 (0.019) [15,716]
Age 35–59/ 64 years	-0.019*** (0.008) [301,801]	-0.008 (0.009) [167,330]	-0.002 (0.012) [69,417]	-0.009 (0.013) [48,835]
Higher qualification level	–	–	-0.005 (0.012) [51,531]	-0.02 (0.012) [39,319]
Lower qualification level	–	–	-0.001 (0.018) [19,055]	0.002 (0.023) [9,168]
(Share of those employed who are) employed in minimum wage sector	-0.008 (0.007) [322,021]	-0.011 (0.013) [75,607]	-0.018 (0.013) [66,462]	0.011 (0.021) [19,439]

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Exploiting the Irish Border to Estimate Minimum Wage Impacts in Northern Ireland

Published Online: Jul 17, 2019

Page range: -

DOI: https://doi.org/10.2478/izajole-2019-0002

Keywordsminimum wages, Northern Ireland, employment, hours

© 2019 Duncan McVicar, Andrew Park, Seamus McGuinness published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 Public License.

Difference-in-differences estimates of impacts of the NLW introduction on employment and hours in NI, coefficients (robust standard errors)

Full difference-in-differences estimates of impacts of the NMW introduction on employment and hours in NI, coefficients (standard errors)

Difference-in-differences estimates of impacts of the NMW introduction on employment and hours in NI, coefficients (robust standard errors)

Appendix: Additional Data Details and ResultsVariable definitions and descriptions

Sample means (standard deviations) for outcomes and other observable characteristics, NI and RoI, pre and post the introduction of NLW

Full difference-in-differences estimates of impacts of the NLW introduction on employment and hours in NI, coefficients (standard errors)

Sensitivity analysis, constant treatment effects, coefficients (robust standard errors)

Sample means/proportions (standard deviations) for outcomes and other observable characteristics, NI and RoI, pre and post the introduction of NMW

Introduction of NMW and NLW as natural experiments

Difference-in-differences estimates of impacts of the NMW and NLW introductions on employment and hours in NI, heterogeneous effects, constant treatment effects, coefficients (robust standard errors; number of observations)

Keywords
minimum wages, Northern Ireland, employment, hours