Small firms and the national minimum wage

Abstract

This article assesses the impact of the National Minimum Wage on small firms in the British hospitality, caring, retail, hairdressing and motor services industries. Drawing on a combination of survey and interview data, the study examines how firms’ pay and training practices have been affected by the introduction of the National Minimum Wage and subsequent changes in the level at which it is set. The different methods by which firms have sought to offset cost increases resulting from the minimum wage are explored. It is shown that quality-enhancement measures have, in some cases, coincided with steps to increase work intensity. The article also assesses the extent to which employers have offered ‘development’ wage rates to young workers and older employees in the first six months of employment and explores employers’ reasons for avoiding paying development wages. Finally, the article examines the processes through which pay is determined in small firms and various factors that influence wage offers.