Monday, 9 January 2017

The UK National Minimum Wage's Impact on Productivity

an article by Marian Rizov (Lincoln International Business School, Lincoln, UK), Richard Croucher (Middlesex University Business School, London, UK) and Thomas Lange (Australian Catholic University, Melbourne, Australia) published in British Journal of Management Volume 27 Issue 4 (October 2016)


Low pay poses issues for managers internationally.

We examine productivity in low-paying sectors in Britain, since the introduction of the National Minimum Wage (NMW). We use a multiple channel analytical strategy, emphasizing the wage incentives channel and linking it to a model of unobserved productivity.

We estimate firm-specific productivity measures and aggregate them to the level of low-paying sectors. Difference-in-differences analysis illustrates that the NMW positively affected aggregate low-paying sector productivity.

These findings highlight increased wage incentive effects with implications for management practice and public policy since ‘living’ wages may be productivity enhancing.

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