The Minimum Wage has reduced sickness absence

In the first of a series of interviews with economics researchers at the Royal Economic Society Conference 2007, Romesh Vaitilingam talks to Martin Robson about the Minimum Wage.

Listen to the interview

[audio:http://www.intute.ac.uk/socialsciences/blog/wp-content/files/res2.mp3%5D

Britain’s national minimum wage has not only raised the pay of low-paid employees. It has also led to a reduction in the rate of these employees’ absence through sickness – and hence improved their productivity. That is the finding of new research by Marco Ercolani and Martin Robson. This effect might help to explain why the introduction of the minimum wage was greeted with apparent equanimity by many employers.

Employee sickness absence is widely recognised as a major problem for the economy. In recent years, for example, it has been calculated that the direct costs of sickness absence in terms of the value of lost output amount to over £11 billion per annum; around 1% of the country’s annual GDP.

On top of this, there are the indirect costs such as the loss of employee morale among those required to cover for absent colleagues. While many instances of employee sickness absence represent genuine cases of ill health, a significant proportion almost certainly does not.

Read more at the Economics in Action blog and search Intute: Social Sciences for more on the Minimum Wage

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