The British national minimum wage

Great Britain has had statutory regulation of minimum pay for much of this century but never previously had a national minimum wage (NMW). This paper outlines the history of minimum wage regulation culminating in 1997 with the establishment of the Low Pay Commission (LPC) and the introduction of the NMW this year. The main issues considered by the LPC were the definition of the NMW, the rate itself and what to do about younger workers. As well as its own deliberations, the LPC took written and oral evidence and held over 200 meetings around the United Kingdom. This process was vital in achieving unanimity around a NMW (ú3.60 from April 1999 for those aged 22+) acceptable to the government. Comparative international evidence on coverage and cost was also important in coming to our conclusions and the British NMW is towards the middle of the range of coverage among OECD countries. Although there is general agreement that minimum wage systems reduce wage inequality, their impact on the distribution of household income is more controversial. Evidence presented suggests the NMW may have a more egalitarian impact on household incomes than is sometimes asserted. The Report of the LPC is only the beginning of the story. Responses to it were generally favourable: parliamentary regulations are needed to translate the recommendations into law; the NMW has to be enforced and evaluated. This necessary follow-up to the Report is discussed in the concluding sections

Unions and Productivity, Financial Performance and Investment: International Evidence

If the presence of a union in a workplace or firm raises the pay level, unless productivity rises correspondingly, financial performance is likely to be worse. If the product market is uncompetitive this might imply a simple transfer from capital to labour with no efficiency effects, but is probably more likely to lead to lower investment rates and economic senescence. Therefore the impact of unions on productivity, financial performance and investment is extremely important. This paper distils evidence on such effects from six countries: USA, Canada, UK, Germany, Japan and Australia. It is not possible to use theory to predict unambiguously any union effect on productivity because unions can both enhance and detract from the productivity performance of the workplace or firm. The evidence indicates that, in the USA, workplaces with both high performance work systems and union recognition have higher labour productivity than other workplaces. In the UK previous negative links between unions and labour productivity have been eroded by greater competition and more emphasis on 'partnership' in industrial relations but there is a lingering negative effect of multi-unionism, just as there is in Australia. In Germany the weight of the evidence suggests that the information, consultation and voice role of works councils enhances labour productivity particularly in larger firms. In Japan unions also tend to raise labour productivity via the longer job tenures in union workplaces which makes it more attractive to invest in human capital and through the unpaid personnel manager role played by full-time enterprise union officials in the workplace. Unions will reduce profits if they raise pay and/or lower productivity. The evidence is pretty clear cut: the bulk of studies show that profits or financial performance is inferior in unionised workplaces, firms and sectors than in their non-union counterparts. But the world may be changing. A recent study of small USA entrepreneurial firms found a positive association between unions and profits and in the UK the outlawing of the closed shop, coupled with a lower incidence of multi-unionism has contributed to greater union-management cooperation such that recent studies find no association between unions and profits. North American and German evidence suggests that unionisation reduces investment by around one fifth compared with the investment rate in a non-union workplace. In both Canada and the USA this effect is even felt at low levels of unionisation. The UK evidence is mixed: the most thorough study also finds that union recognition depresses investment, but this adverse effect is offset as density rises. The exception is Japan where union recognition goes hand-in-hand with greater capital intensity.unions, productivity, profits, investment

Tax Policy for Financing Alternative Energy Equipment

European countries have taken the lead in investigating in renewable energy electricity generating capital. While the EU-15 countries had less than half the installed capacity of the United States in 1990, they currently have more than double the capacity. This study investigates differences in the policy environment between Europe and the United States and identifies key policy differences that impact renewable electricity investment. The review of the European and US experience provides a number of lessons to guide future renewables policy in the United States. First, the European experiment with feed-in tariffs and renewable portfolio standards suggests that feed-in tariffs may dominate RPS systems as effective policy tools to encourage investment. Second, the US preference for tax incentives has clearly not had the same simulative investment impact as have feed-in tariffs. Third, a modest feed-in tariff for wind and biomass would make these technologies cost competitive with natural gas. Fourth, it is clear that considerable research and technological development will be required before solar electricity can compete in the market place regardless of the pricing support policy in place.

Tax Policies for Low-Carbon Technologies

The U.S. tax code provides a number of subsidies for low-carbon technologies. I discuss the difficulties of achieving key policy goals with subsidies as opposed to using taxes to raise the price of pollution-related activities. In particular, subsidies lower the cost of energy (on average) rather than raising it. Thus consumer demand responses work at cross purposed to the goal of reducing emissions (especially as average cost pricing is used for electricity). Second, it is difficult to achieve technology neutrality with subsidies-here defined as an equal subsidy cost per ton of CO2 avoided. Third, many subsidies are inframarginal. Finally, subsidies often suffer from unintended interactions with other policies. I conclude with some observations on the use of price-based instruments. In particular I discuss how a carbon tax could be designed to achieve environmental goals of emission caps over a control period.

Investment in Energy Infrastructure and the Tax Code

Federal tax policy provides a broad array of incentives for energy investment. I review those policies and construct estimates of marginal effective tax rates for different energy capital investments as of 2007. Effective tax rates vary widely across investment classes. I then consider investment in wind generation capital and regress investment against a user cost of capital measure along with other controls. I find that wind investment is strongly responsive to changes in tax policy. Based on the coefficient estimates the elasticity of investment with respect to the user cost of capital is in the range of -1 to -2. I also demonstrate that the federal production tax credit plays a key role in driving wind investment over the past eighteen years.electricity, wind power, production tax credits, tax subsidies