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Welfare Reform on the Web (September 2003): Minimum Wage - UK

THE IMPACT OF THE NATIONAL MINIMUM WAGE IN SMALL FIRMS

J. Arrowsmith and others

British Journal of Industrial Relations, vol.41, 2003, p.435-456

Using longitudinal data on 55 small firms, paper examines the impact of the national minimum wage (NMW) on small businesses in the clothing manufacture and hotel and catering industries. Identifies three responses to the NMW:

  • implement;
  • ignore;
  • critical incident.

Firms in the hospitality industry mostly implemented the NMW without restructuring pay systems or work organisation. In clothing, implementation was associated with some rationalisation and the abandonment of piecework. Most firms strongly denied indulging in illegal practices to evade the NMW. Finally, in some firms the arrival of the NMW was the critical incident which triggered a shift to a specific niche market. Overall the impact of the NMW was mediated by the informality of employment relations in small firms.

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