The UK National Minimum Wage's Impact on Productivity

Rizov, Marian; Croucher, Richard; Lange, Thomas

doi:10.1111/1467-8551.12171

Cited by 17 publications

(14 citation statements)

References 71 publications

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“…Lower wages will cause the work effort to lower levels, that is, the employees will make basic effort for that wage. The efficiency wage models foresee that the companies cannot reduce their wages, even when unemployment is high, in case the productivity depends on wages (Shapiro and Stiglitz, 1985;Moll, 1993;Skott and Guy, 2007;Rizov et al, 2016;Antony et al, 2017;Asaleye et al, 2017;Mihályi and Szelényi, 2019).…”

Section: Efficiency Wage Theorymentioning

confidence: 99%

Efficiency wage and work effort: Case study of a Brazilian multinational company

Fritoli¹,

Laffin²,

Bonacim³

et al. 2021

Afr. J. Bus. Manage.

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This research paper explores how employees of a multinational glass manufacturing company see the pay offered by the company and how it affects, directly or indirectly, their efforts to perform their duties. For this purpose, a case study was carried out in a glass manufacturing company located in the southernern region of Brazil throughout 2017. Literature review is focused on the theoretical model based on the idea that there is a positive variation of efforts with the company supervision intensity was tested, and it pointed out that the moral hazard of being caught shirking is related to supervision. Using the Ordinary Least Square (OLS) method, the relationship between wages and supervision intensity was empirically tested, according to the model suggested by Shapiro and Stiglitz (1984), in which there is a trade-off between supervision and actual wage. The results corroborate the efficiency wage theory: 90% of the sample consider extra benefits, besides the wages, important and only 2.02% consider the wage of the greatest motivator for continuing in the company. The analyses carried out in the research present striking data regarding the employees' perception of the benefits offered. That way, the loss of these benefits may affect the collaborators' efforts. Therefore, the company must concentrate on incentive strategies towards the benefits.

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Section: Efficiency Wage Theorymentioning

confidence: 99%

Efficiency wage and work effort: Case study of a Brazilian multinational company

Fritoli¹,

Laffin²,

Bonacim³

et al. 2021

Afr. J. Bus. Manage.

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“…One lever which resides at the national level (at least in the UK), and which can potentially support moving out of a LSEq, is the minimum wage, which can make reliance on low-skill/low-wage employment a less viable business model (Lauder, 1999). There is some evidence that minimum-wage rises encourage employers to look at ways of improving productivity (Green et al, 2018;Rizov et al, 2016). Other potential policy triggers for development reside across local and national levels.…”

Section: Policy and The Local Lseqmentioning

confidence: 99%

The local low skills equilibrium: Moving from concept to policy utility

Sissons

2020

Urban Studies

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It is more than three decades since the publication of Finegold and Soskice’s (1988) influential article ‘The failure of training in Britain: Analysis and prescription’. This widely cited publication popularised the notion of the low skills equilibrium (LSEq). The LSEq described how at the national level, weakness in the education and training system, aligned with the nature of political-economic institutions, acted as both a cause, but was also a consequence, of weak economic performance. In the period since, the LSEq thesis has been developed and deployed in a range of ways, including with an increasing emphasis on localised low skills equilibria and their relationship to spatially uneven development. However, there are a number of unresolved concerns with the use of the LSEq to describe regional, urban and local outcomes. These include the limits to aggregate analysis, which obscures detailed assessment of causal mechanisms; weaknesses in approaches to measurement to test the LSEq; and insufficient attention to change over time. This article makes three central contributions. First, it assesses the important conceptual issues associated with the development of the LSEq, its application to regional and local economies and the related measurement issues. Secondly, the article outlines a set of research gaps and an agenda to help identify the ways these issues might be resolved. Thirdly, the article addresses the question of policy, and the extent to which a better understanding of the problem might facilitate interventions aimed at unlocking the local LSEq.

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“…British firms reacted by increasing total factor productivity (TFP) without Bodn reducing their workforce or resorting to capital-labour substitution, consistent with theories of organisational change, training and efficiency wages (Riley and Bondibene, 2017). A NMW may thus enhance aggregate productivity, specifically for the low-paying sector, justifying management practice and public policy of offering higher wage incentives (Rizov et al, 2016). Productivity improvement is a more popular form of adjustment to minimum wage rises than employment reduction, as observed by Bodnár et al (2018) in Central and Eastern European countries.…”

Section: Literaturementioning

confidence: 99%

How does employment respond to minimum wage adjustment in China?

Wye

Bahri

2020

The Economic and Labour Relations Review

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Under what circumstances can minimum wages increase without adverse effects on employment levels? In 31 Chinese provinces between 2004 and 2015, the employment effect of a minimum wage depended on the minimum wage level, foreign direct investment, per capita gross domestic product and labour productivity. A minimum wage increase reduced hiring as foreign direct investment inflow rose, regardless of the amount of investment. Any positive employment effect of a minimum wage increase was mitigated by per capita gross domestic product growth, except when per capita gross domestic product was above the average. Above-average labour productivity enhancement significantly mitigated the adverse employment effect of the minimum wage. Employers responded to a rising minimum wage by increasing hiring when the geometric growth rates of the minimum wage and foreign direct investment for a particular province within a period of time were above the overall average across provinces. However, they scrutinised both annual and overall economic growth within a time period when making hiring decisions in the face of minimum wage adjustments. An inverted U-shape relationship between minimum wages and employment suggest a maximum threshold value for the minimum wage. Thus, government policy measures should foster short-term and long-term economic growth, to facilitate employment creation when minimum wages increase. JEL Codes: J38, J21, F16, O40

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The UK National Minimum Wage's Impact on Productivity

Cited by 17 publications

References 71 publications

Efficiency wage and work effort: Case study of a Brazilian multinational company

Efficiency wage and work effort: Case study of a Brazilian multinational company

The local low skills equilibrium: Moving from concept to policy utility

How does employment respond to minimum wage adjustment in China?

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