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The influence of the national minimum wage on pay settlements in Britain

Bryson, Alex and Lucchino, Paolo (2014) The influence of the national minimum wage on pay settlements in Britain. Low Pay Commission (LPC) Research Reports 2014, Low Pay Commission, London, UK.

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Abstract

SUMMARY OF FINDINGS: - Around 30% of all workplaces mention the NMW as an influence on the pay settlement of their largest occupational group (LOG). These workplaces cover around 23% of all employees. - The NMW is the third most quoted factor out of a possible nine, ranked well behind 'financial performance', but only slightly behind 'changes to the cost of living'. - When the NMW is cited as an influence on the pay settlement of the largest occupational group, there is strong evidence of bunching of the size of the settlement around the size of the NMW increase. - Around 15% of workplaces where the median wage is above £7.50 per hour mention the NMW as an influence on the latest pay settlement. We interpret this as evidence of the NMW having an influence on the settlements of at least some workers paid above the NMW. - Higher-paying workplaces that cite the NMW as an influence on pay settlements tend not to pass through the full uprating, indicating that any influence of the NMW is being weighed against other factors as part of a broader calculus. This is consistent with the possibility of the NMW compressing wage differentials. - In both the private and public sectors, the share of employees paid at or near the NMW is the strongest positive correlate of whether the NMW is mentioned as an influence on pay settlements. - In the private sector, the share of women, part-time and non-British workers are all positively associated with the NMW being mentioned as an influence on pay settlements (even conditioning on pay). Industry, occupation and geographic region are significantly associated with whether the NMW influences pay settlements but lose most of their significance once pay and market competition variables are accounted for. - For private sector workplaces, results suggest that the NMW is more likely to be mentioned as an influence on pay settlements the higher the level of decision-making and the larger the group of workers affected. This may be explained by access to richer information sets and more sophisticated evidence to inform pay determination. - In the private sector, the way in which pay is determined for the largest occupational group is a relevant factor behind whether the NMW is mentioned as an influence on the pay settlement, even when accounting for workforce characteristics and pay. The NMW appears to ‘step-in’ in the absence of collective bargaining. - In the public sector, very few characteristics emerge as positively correlated with the NMW being mentioned as an influence on pay settlements. These are the share of employees paid the NMW, being a multi-workplace organisation and having a single method for determining the pay of all nonmanagerial occupational groups. - There was little association between workplaces’ experience of the recession and whether they mentioned the NMW as an influence on the pay settlement of the largest occupational group. However, those mentioning the NMW had taken different measures in response to the recession than those that did not mention the NMW. For example, they were more likely to have absorbed the shock by reducing hours rather than employment.

Item Type: Monograph (Report)
Official URL: https://www.gov.uk/government/organisations/low-pa...
Additional Information: © 2014 The Authors. Crown copyright.
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
J Political Science > JN Political institutions (Europe) > JN101 Great Britain
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Projects: 2011 Workplace Employee Relations Survey
Date Deposited: 03 Jun 2014 11:54
URL: http://eprints.lse.ac.uk/56948/

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