- Home
- Publications
- Raising The Standard: Minimum Wages And Firm Productivity
Raising the Standard: Minimum Wages and Firm Productivity


Related Themes
Productivity, Trade, and Regional EconomiesTags
JEL Code
J08, J31, J38, L25
Paper Category Number
449
This paper exploits the introduction of the National Minimum Wage (NMW) in Britain and subsequent increases in the NMW to identify the effects of minimum wages on productivity. We find that the NMW increased average labour costs for companies that tend to employ low paid workers, both upon the introduction of the NMW and more recently following the Great Recession when many workers experienced pay freezes or wage cuts, but the NMW continued to rise. We find evidence to suggest that companies responded to these increases in labour costs by raising labour productivity. These labour productivity changes did not come about via a reduction in firms' workforce or via capital-labour substitution. Rather they were associated with increases in total factor productivity, consistent with organisational change, training and efficiency wage responses to increased labour costs from minimum wages.
Related Blog Posts



Uncovering Scotland’s Productivity Performance
Ana Rincon-Aznar
Adrian Pabst
03 Oct 2022
5 min read

Why is UK Productivity Low and How Can It Improve?
Issam Samiri
Stephen Millard
26 Sep 2022
9 min read
Related Projects
Related News
Related Publications

The Multilateral Context for European and Australian Economic Cooperation
09 Aug 2023
Global Economic Outlook Box Analysis

The Windsor Framework: What it is and What it Might Do
09 Aug 2023
UK Economic Outlook Box Analysis


Evidence Session Summary: The Role of International Investment
20 Jul 2023
UK Productivity Commission
Related events

Prais Lecture – with Chris Pissarides

Productivity Commission Evidence Session: Examining the Role of International Investment

High Dimensional Forecasting and its Pitfalls – M. Hashem Pesaran

Finance and Growth Workshop

Productivity Commission Evidence Session: The Role of Public Investment in Growth

Productivity Commission Evidence Session: The Underperformance of Business Investment

Productivity Commission Evidence Session: What and How Can Productivity Be Improved?

Productivity Commission Evidence Session on International Best Practice

