Guglielmo Meardi

Scuola Normale Superiore

Employers and employees’ responses to the UK national living wage in non-compliant small firms

Which way out of poor work in the informal sector?

Guglielmo Meardi, Scuola Normale Superiore

Concerns with the regulation of ‘poor work’ in a context of declining collective bargaining coverage have been growing in the last decades, resulting in the introduction of national minimum wages in countries that did not have them (UK, Germany) and campaigns for generous increases in their levels (especially in the USA). The use of individual legal rights, decoupled from collective self-regulation tools, may however meet problems of legitimacy and enforcement, and increases in the levels of minimum wage might increase non-compliance, resulting in more informal forms of work. The paper addresses this issue by looking at the reactions of non-compliant small firms to the introduction of the National Living Wage in the UK in 2016, which involved a substantial increase of the minimum wage and new enforcement mechanisms. Drawing on 22 mostly longitudinal case studies of small non-compliant firms in the Birmingham area, involving interviews with both employers and employees across time, the paper addresses the finding of overwhelming continuity in non-compliance despite regulatory and economic changes. By detecting institutional sources of such continuity, as well as some factors behind the rare cases of transition to compliance, the paper proposes that non-compliant managerial practices are unlikely to be by transformed by legal regulations alone, but are susceptible to be affected in labour supply changes, and in particular better information and socialization of workers in the low-pay segments of the labour market. Implications are drawn for both labour market and immigration policy.

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