The impact of the National Minimum Wage on UK businesses

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Summary & aims

Firms may respond in a number of ways to the increase in wages arising with the National Minimum Wage (NMW). Some empirical studies suggest that businesses may have passed on the rise in costs to output prices or absorbed it in reduced price-cost margins. Others have found evidence of positive productivity effects associated with the NMW. Most of these studies consider the way in which businesses have responded to the NMW in a growing economy. Less is known about the way the NMW has affected businesses during the recession and the period of weak economic growth that followed.


Questions addressed

We analysed business datasets to assess: How has the distribution of average labour costs across businesses developed since the introduction of the NMW? How has the NMW affected the behaviour of smaller and larger firms and firms in the low paying sectors? In particular, how have these impacts changed since 2008 and with recent NMW upratings?


This study was funded by the Low Pay Commission. It updated and extended an earlier study for the Low Pay Commission published here


Updated and extended report


May 2013 - April 2015