Pay Settlements and the Minimum Wage

The identifies the influence the national minimum wage has on pay settlements in British workplaces.

Background

One of the chief difficulties policy makers face in setting a statutory national minimum wage (NMW) is the potential for the statutory rate to affect wage setting more generally in the economy.  This may result in wage push inflation and potential job loss. Of course, the direct intention of a NMW is to ensure that no employer pays covered workers at a lower rate than the NMW.  But potential problems arise if the rate influences the pay claims of those above the NMW rate, as might be the case if they are concerned about maintaining pay differentials with the lowest paid workers.  Employers may also feel pressure to maintain differentials relative to the NMW if they are to recruit and retain the quality of workers they need for their businesses.  This concern is, perhaps, particularly prescient at a time when real wages and - in some cases - nominal wages are falling in the economy, and when there has been a period over which the adult NMW has risen relative to average earnings. It has been difficult for policy makers to identify whether the NMW does influence wage settlements in the economy due to data deficiencies. 

Methods

This project will fill this gap in knowledge through analyses of the Workplace Employment Relations Survey 2011 (WERS). WERS is a linked employer-employee data set which, with sampling weights, is a nationally representative survey of workplaces with 5 or more employees in the public and private sectors. In 2011 HR managers were asked: "Looking at this card, which of the factors listed influenced the size of the pay settlement or review for [largest occupational group]?" The NMW is identified as one of six specific responses. The study identifies factors linked with mentioning the NMW as an influence

Timescale and outputs

The project began in 2013.  The report is due out in Spring 2014.

Funder and partners

The research is funded by the Low Pay Commission.