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The Impact of the National Minimum Wage in Small Firms

Author

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  • James Arrowsmith
  • Mark W. Gilman
  • Paul Edwards
  • Monder Ram

Abstract

The introduction of the National Minimum Wage (NMW) had potentially significant implications for small firms. Orthodox economic theory predicts adverse consequences, though institutional analysis points to potential efficiency as well as fairness effects. Using longitudinal data on 55 firms, this paper examines the impact of the NMW in small firms in clothing manufacture and hotel and catering. Different patterns of adjustment were observed, explained by both size and sector characteristics. Overall, the impact of the NMW was mediated by the informality of employment relations in the small firm.

Suggested Citation

  • James Arrowsmith & Mark W. Gilman & Paul Edwards & Monder Ram, 2003. "The Impact of the National Minimum Wage in Small Firms," British Journal of Industrial Relations, London School of Economics, vol. 41(3), pages 435-456, September.
    • Handle: RePEc:bla:brjirl:v:41:y:2003:i:3:p:435-456
    DOI: 10.1111/1467-8543.00281
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    Cited by:

    1. David Williamson & Gary Lynch-Wood & John Ramsay, 2006. "Drivers of Environmental Behaviour in Manufacturing SMEs and the Implications for CSR," Journal of Business Ethics, Springer, vol. 67(3), pages 317-330, September.
    2. Mahesh Somashekhar & James Buszkiewicz & Scott W. Allard & Jennifer Romich, 2022. "How Do Employers Belonging to Marginalized Communities Respond to Minimum Wage Increases? The Case of Immigrant-Owned Businesses in Seattle," Economic Development Quarterly, , vol. 36(2), pages 108-123, May.
    3. Colm McLaughlin, 2007. "The productivity enhancing Impacts of the Minimum Wage: Lessons from Denmark, New Zealand and Ireland," Working Papers wp342, Centre for Business Research, University of Cambridge.
    4. Monder Ram & Kassa Woldesenbet & Trevor Jones, 2011. "Raising the ‘table stakes’? Ethnic minority businesses and supply chain relationships," Work, Employment & Society, British Sociological Association, vol. 25(2), pages 309-326, June.
    5. Colin. C. Williams, 2008. "Illegitimate wage practices in Eastern Europe: - The case of 'envelope wages'," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 13(3), pages 253-270.
    6. Barry T. Hirsch & Bruce E. Kaufman & Tetyana Zelenska, 2015. "Minimum Wage Channels of Adjustment," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(2), pages 199-239, April.
    7. Robert Wapshott & Oliver Mallett, 2018. "Small and medium-sized enterprise policy: Designed to fail?," Environment and Planning C, , vol. 36(4), pages 750-772, June.
    8. George Saridakis & Sukanya Sen‐Gupta & Paul Edwards & David J. Storey, 2008. "The Impact of Enterprise Size on Employment Tribunal Incidence and Outcomes: Evidence from Britain," British Journal of Industrial Relations, London School of Economics, vol. 46(3), pages 469-499, September.
    9. Monder Ram & Paul Edwards, 2003. "Praising Caesar Not Burying Him: What We Know about Employment Relations in Small Firms," Work, Employment & Society, British Sociological Association, vol. 17(4), pages 719-730, December.
    10. J. Shackleton, 2007. "Britain’s Labor Market Under the Blair Governments," Journal of Labor Research, Springer, vol. 28(3), pages 454-476, July.
    11. Alessandra Brito & Miguel Foguel & Celia Kerstenetzky, 2017. "The contribution of minimum wage valorization policy to the decline in household income inequality in Brazil: A decomposition approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(4), pages 540-575, October.
    12. Colm McLaughlin, 2009. "The Productivity‐Enhancing Impacts of the Minimum Wage: Lessons from Denmark and New Zealand," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 327-348, June.
    13. Monder Ram & Trevor Jones, 2008. "Ethnic-Minority Businesses in the UK: A Review of Research and Policy Developments," Environment and Planning C, , vol. 26(2), pages 352-374, April.
    14. Eva Lajtkepová, 2010. "Minimum Wage and Labour Market [Minimální mzda a trh práce]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2010(1), pages 3-20.
    15. Trevor Jones & Monder Ram, 2007. "Re-embedding the ethnic business agenda," Work, Employment & Society, British Sociological Association, vol. 21(3), pages 439-457, September.

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