The effects of minimum wage policy on the long-term care sector

Through the combined increase in the National Minimum Wage rate in October 2015 and the introduction of the National Living Wage in April 2016, workers aged 25 and over paid at minimum wage, had an over 10 percent pay raise. The long-term care (LTC) sector in England is a labour intensive, low pay sector, and as such, can be substantially affected by changes in minimum wage legislation. We assess the effects of this exogenous wage increase on independent LTC providers by looking at effects on wages, employment, employment conditions, productivity, and staff stability. Using data from the National Minimum Data Set for Social Care (NMDS-SC) and applying a ’beforeafter’ analysis, we find that the substantial increase in minimum wage had a strong and positive effect on wages in the LTC sector, with quite substantial compression of the wage distribution at the lower end. Although, as in many other studies, the employment effect is elusive, we find that this might be at least partially explained by a negative effect on employment conditions. Everything else equal, minimum wage policy had a positive effect on employment on zero-hours contracts, meaning that it contributed significantly to slowing down the downward trend in employment on zero-hours contracts in the sector.