Small Firms and the National Minimum Wage

Posted: 4 Nov 2009

See all articles by Jim Arrowsmith

Jim Arrowsmith

affiliation not provided to SSRN

Mark W. Gilman

University of Kent, Canterbury

Date Written: 2005


Data from a longitudinal research programconducted under the ERSC's Future of Work program are used to examinehowsmall firms experience a "regulatory shock" when confronted with thenational minimum wage (NMW), institutedin the UK in 1999. Boththeoretical and methodological aspects of the NMW regulatory shock arepresented, along with a brief history of the NMW. To examine the patterns of adjustment to the NMW, the analysis focusontwo sectors—clothing manufacture and hotels and catering. The data aredrawn fromsemi-structured interviews with owner-managers and employees of55 firms, conducted at two points in time to assess the longitudinalimpact. The findings suggest that firms enjoyed a range of indeterminacy in thesetting of pay, with pay levels before the new regulationsreflecting notonly economic, product, and labor market factors, but also the informality ofinternal pay structures. The NMW was found most successful in terms of fairnessrather than efficiency, but had a generally benign impact on firms. Somedifferences were seen between the two industries, and the impact of the newregulations was analyzed for each industry by four possible responses,categorized as achievement, futility, perversity andjeopardy.(CBS)

Keywords: Catering industry, Employee attitudes, Employee relations, Employee turnover, Wages & salaries, Regulatory compliance, Clothing industry, Hotel & motel industry, Minimum wages, Hospitality industry, Labor force

Suggested Citation

Arrowsmith, Jim and Gilman, Mark W., Small Firms and the National Minimum Wage (2005). Managing Labour in Small Firms, Vol. , p. 159-177 2005. Available at SSRN:

Jim Arrowsmith (Contact Author)

affiliation not provided to SSRN

No Address Available

Mark W. Gilman

University of Kent, Canterbury ( email )

Canterbury Business School
Canterbury, Kent CT2 7PE
United Kingdom

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