"Government contracting and living wages > minimum wages" - New paper from @s_machin_ & myself now out as a @CEP_LSE DP. The paper studies a prevalent ESG clause in government procurement contracts: Living Wages set considerably higher above the mandate minimum. (1/n)
We study the question using data for a UK based services firm with hundreds of establishments across the UK with procurement contracts w/local government (Local Authorities). When a LA becomes a LW employer, it becomes a contractual obligation in their procurement contracts. 2/n
The Living Wage rates adopted are those set by the @LivingWageUK and are based on a basket of goods calculation each year and they set a rate for London (LLW) and the rest of the UK (UKLW). The LLW is around 30-35% higher than the NMW/NLW and the UKLW about 15-20%. 3/n
Identification comes from when a LA signs up to the LW, the establishments with procurement contracts with that LA the LW becomes their new binding wage floor. And we have a lot of variation in this over the time period of study- almost half get treated. 4/n
It's a pretty neat setting - establishments are operated by the same company using the same structure of operations and management, but with establishment level autonomy over finances, employment, and workforce composition, giving a pretty good counterfactual. 5/n
We look at a wide range of possible margins of adjustment - traditional (wages/employment) firm performance (prices, exit, quality based on google reviews), labour-labour substitution and wage & contract policies. 6/n
1. Super strong wage effects can just be seen by looking at pre-post wage distributions. These are for establishments treated in 2017,post introduction around 60-70% of workers get paid the LW. Note-firm operates in a "Low Pay" industry as classed by @lpcminimumwage 7/n
We see no evidence of reductions in employment, rather there are some suggestions of increases in total employment consistent with monopsony, but results are on the bounds of significance 9/n