The UK national minimum wage’s impact on productivity

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.

© 2016 The Authors British Journal of Management published by John Wiley & Sons Ltd on behalf of British Academy of Management
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