The impact of the National Minimum Wage on UK businesses

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.