Government Contracting and Living Wages > Minimum Wages by Nikhil Datta

Join us for the latest Applied Economics Research Seminar Series event, Spring Term 2024.

Nikhil Datta, from the Economics Department at the University of Warwick, will present this seminar on Government Contracting and Living Wages > Minimum Wages.

Abstract

Government procurement accounts for approximately 15% of GDP, and environmental, social and corporate governance (ESG) clauses in these contracts are becoming prolific across developed economies. This paper studies one of these clauses: Living wages set considerably higher than the mandated minimum. When a local government signs up to become a living wage employer, as a significant number did in the time period we study, firms that have procurement contracts with them have to pay workers the living wage. This variation is studied with rich matched data on workers in establishments for a service sector company with many establishments located in the UK. Just under half of the firm’s establishments were made to comply with the living wage as a consequence of the local government becoming a living wage employer in the period between 2011 and 2019. In a staggered difference-in-differences research design, low wage workers are shown to receive a significant wage boost from the living wage introduction. Consistent with a model of monopsony power and where bottom-of-the-rung workers and supervisors are gross complements, the living wage induced labour-labour substitution in favour of the former. Further adjustment to the wage bill increase from the introduction of the living wage took place through within-establishment internal changes to the establishment pay policy structures.

The seminar will begin with a presentation and will end with a Q and A session.

It will be held in the Economics Common Room at 2pm on Thursday 22 February. This event is open to all levels of study and is also open to the public. To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Applied Economics Research Seminar Series.