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The impact of the National Minimum Wage on firm behaviour during recession
Authors
Professor Rebecca Riley
Related Themes
Labour, Employment and WagesReport to
Low Pay Commission
This paper examines the impact of the National Minimum Wage (NMW) on a range of outcomes for low-paying companies in the UK. We distinguish between the impacts of the NMW on small and larger firms and on firms in the low-paying sectors. We examine how these effects have changed since the introduction of the NMW in 1999. We find that upon introduction the NMW increased average labour costs for low-paying companies. Since then, its effects on companies' labour costs have been more muted. As in some previous studies, we find evidence to suggest that companies may have adjusted to the increases in labour costs as a result of the NMW by raising labour productivity and by reducing profitability. We find no robust evidence to suggest that the NMW has changed average employment or investment rates for these companies. Nor do we find robust evidence to suggest that the NMW has had a detrimental impact on firm outcomes since the financial crisis and the recession of 2008.
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