The UK national minimum wage’s impact on productivity

Rizov, Marian, Croucher, Richard ORCID: https://orcid.org/0000-0002-9617-734X and Lange, Thomas (2016) The UK national minimum wage’s impact on productivity. British Journal of Management, 27 (4) . pp. 819-835. ISSN 1045-3172 [Article] (doi:10.1111/1467-8551.12171)

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Abstract

Low pay poses issues for managers internationally. We examine productivity in low-paying sectors in Britain, since the national minimum wage’s (NMW) introduction. We use a multiple channel analytical strategy, emphasising 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 wages’ incentive effects with implications for management practice and public policy since ‘living’ wages may be productivity enhancing.

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