This document discusses how UK national minimum wages may affect the non-wage benefits provided to labor migrants. It first presents the historical minimum wage rates in the UK. It then reviews literature on the potential impacts of minimum wages on employment levels and non-wage benefits like training and fringe benefits. The document finds mixed evidence from studies in the US and UK on the effects of minimum wages. It concludes by outlining the methodology as using secondary data sources to analyze these issues in the UK context.

1. How UK National Minimum
Wages affect the Non-Wage
Benefits of Labour Migrants?
Maria Elfani
Postgraduate Research Student Society
12 November 2010

2. Agenda:
1. Impact of Minimum Wage to
Employement
2. Impact of Minimum Wage to Non-Wage
Benefits
3. Methodology

3. Historical UK National Minimum Wage
Adult Rate 22+ Development Rate (18-21) 16-17 Yrs Rate
1-Apr-99 £3.60 £3.00 -
1-Oct-00 £3.70 £3.20 -
1-Oct-01 £4.10 £3.50 -
1-Oct-02 £4.20 £3.60 -
1-Oct-03 £4.50 £3.80 -
1-Oct-04 £4.85 £4.10 £3
1-Oct-05 £5.05 £4.25 £3
1-Oct-06 £5.35 £4.45 £3.30
1-Oct-07 £5.52 £4.60 £3.40
1-Oct-08 £5.73 £4.77 £3.53
1-Oct-09 £5.80 £4.83 £3.57
1-Oct-10 £5.93 £4.92 £3.64

4. Impact of Minimum Wage to
Employement
Research Question:
Will the increasing Minimum Wage
reduce employment?

5. Literature Review:
Minimum Wages  Employment ↓
Employment
S
D
W1
E1E2
W2
Wages
(Gwartney and Stroup,1987)
E3
A
B C

6. Impact of Minimum Wage to
Non-Wage Benefits
Research Question:
Will the increasing Minimum Wage
reduce non-wage benefits?

7. Literature Review:
• Non-wage benefits is the compensation other than
wages
• Non-wage benefits count for 26.9% of total
compensation (Ehrenberg and Smith, 2003)
• Because of their large proportion to total
compensation, organization sometimes implements
changes to their benefit program to control the cost
(Williams, M.L., 1995)
• To the extent that 15% of these benefits are voluntary
and flexible, it may lead to changes in compensation
regulation (Pierce, 2001).

8. (Survey by employeebenefits.co.uk in 2009)

9. Literature Review:
Empirical Evidence in the US
1. Training
• Leighton and Mincer (1981); Hashimoto (1982);
Neumark and Wascher (2001) found that an
increase in minimum wages may lead to a
reduction in on-the-job training
• Lazear and Miller (1981), Acemoglu and Pischke
(1999) found that minimum wages have no effect to
training

10. Literature Review:
Empirical Evidence in the US
2. Fringe Benefits
• Wessels (1980) and Alpert (1986) found that an increase
in minimum wages will make small reductions in fringe
benefit in the retail and restaurant industries
• Royalty (2000) however found a surprising result that a
small increase in minimum wages will increase health
insurance and pension benefits, but larger increase in
minimum wages will reduce the health insurance and
pension benefit.
• Simon and Kaestner (2004) however found that there is
no effect of minimum wages to fringe benefits

11. Literature Review:
Empirical Evidence in the UK
• Dickerson (2007) reported that there is no
significant evidence to say that changing in
Minimum Wage will change the training provision
• Allison, et al (2009) in their survey to 202
companies/organizations operating in low pay
sector reported that only two fast food companies
and two social care organizations reduce their
training budget but this is not fully due to an
increase in NMW, but due to an increasing in the
cost elsewhere

12. Methodology
Secondary data:
 Labour Force Survey
 Workplace Employee Relations Survey
 Annual Survey of Hours and Earnings