National Minimum Wage

Chapter 2: The Impact of the National Minimum Wage
seemed to be invariant to the detail of geography used or the way in which the recession
was modelled. They concluded that the spatial effects of the minimum wage on employment
were limited.
2.99 Previous research using spatial data has generally concluded that there is little strong
evidence of any employment effects. Analysing employment changes across local areas in
the period that covered the introduction of the minimum wage, Stewart (2002) found some
weak but not statistically significant evidence of a reduction in employment. Galindo-Rueda
and Pereira (2004) also found no evidence on employment levels but did find a significant
impact of the minimum wage on employment growth. Looking at the 2003 and 2004
upratings, Experian (2007) found no effects of the minimum wage on regional employment.
Assessing the period 2001-2006, Dickens, Riley and Wilkinson (2010) found no effects on
employment but did find some weak evidence that the minimum wage may have encouraged
participation and that had led to increases in unemployment. However, Dolton, Rosazza
Bondibene and Wadsworth (2009) found that unemployment rates fell more in areas where
the minimum wage bite was greatest in the period of large minimum wage increases (2003-
2006). Over the whole period (1999-2007), they found little impact of the minimum wage on
employment but they did find a small but significant positive effect of the minimum wage
since 2003 when investigating individual years.
2.100 The impact of the minimum wage has also been investigated using numerous case studies
of firms. These have generally consisted of surveys of firms across the low-paying sectors.
Examples include IDS (2011a), which summarised the findings of their previous reports,
Grimshaw and Carroll (2002) and Cronin and Thewlis (2004). These have generally concluded
that firms have tended to make changes to their pay structures in response to minimum
wage increases rather than adjust employment.
Views on Employment and Hours
2.101 Employers’ organisations have emphasised the particular pressures currently faced by
businesses, especially those which are lower-paying and consumer-facing. CBI said that
these sectors, where the NMW has a major impact, face particularly challenging trading
conditions. It said that consumers’ budgets were stretched, and further job losses were
more likely than increased levels of employment.
2.102 BHA, BBPA and BISL noted employment had peaked in hospitality in 2008, before falling
back in the following two years. These bodies thought that some of this might be due to
cumulative rises in the minimum wage, although anecdotal evidence suggested that many
employers cut hours rather than headcount during the recession. The NMW may, however,
have reduced job growth, although they thought this was probably not capable of proof.
Unlike last year, the ALMR did not find job losses and reduced hours or benefits resulting
from the rise in the minimum wage, but it remained concerned about the likely impact of any
additional costs and regulatory burdens at this point in the economic cycle.
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