Publication details

Minimum wage and tolerance for high income

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Authors

FAZIO Andrea REGGIANI Tommaso

Year of publication 2023
Type Article in Periodical
Magazine / Source European Economic Review
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web https://www.sciencedirect.com/science/article/pii/S0014292123000740
Doi http://dx.doi.org/10.1016/j.euroecorev.2023.104445
Keywords Inequality; Redistribution; Minimum wage; Loss aversion; Reference point; UK.
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Description We suggest that stabilizing the baseline income can make low-wage workers more tolerant towards high income earners. We present evidence of this attitude in the UK by exploiting the introduction of the National Minimum Wage (NMW), which institutionally sets a baseline pay reducing the risk of income losses and providing a clear reference point for British workers at the lower end of the income distribution. Based on data from the British Household Panel Survey (BHPS), we show that workers who benefited from the NMW program became relatively more tolerant of high incomes and more likely to support and vote for the Conservative Party. As far as tolerance for high incomes is related to tolerance of inequality, our results may suggest that people advocate for equality also because they fear income losses below a given reference point.
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