Chapter 1: Introduction

The concept of National Minimum Wage (NMW) and its implications as by the companies or nations have a great impact on the performance of small or large operating firms (Georgiadis, 2006). Many theorists believed that this regulation has actually increased the labor cost in small firms and in return effect positively on organization’s overall performance (Wincenciak, 2010).  The relationship of wage and productivity will be described in this study through Wage Hypothesis Theory (Curtiss, 1963). This study will explore different views presented by this theory on how firms can maximize their profit through employment development

Research Aims and Objectives

The present study aims to discover the effect of Minimum National Wages on firm’s production. The focus of the study is to explore the underlying relationship between National Wages and employee’s performance and  how this relationship contribute in the increases or decrease of company’s overall efficiency  and performances.. Keeping in mind the above mentioned facts the following aims and objectives are drawn for the study.

The present Study aims to discover:

• The relationship between Minimum National Wage and firm’s productivity.
• The effect of Minimum National Wage on firm’s behavior in different economic conditions.
• The strategies that companies adopt in influencing firms behavior and productivity.
• How companies are incorporating technology to substitute labor to reduce their expenses and increasing their productivity.

The present study will focus to study the above mentioned research objectives.

Chapter 2: Literature Review

A lot of work has been done in the field of examining the impact of National Minimum Wage on employee’s performances. However how this impact affects the organizational performance and productivity is still to be discovered in detail (Aslam, 2003). Many researches claim that the relationship of Minimum Wages and the behavior of employees are neutral therefore the direction was shifted to explore its effect on firm’s productivity and behavior (Portes, 2015). The results of those researches indicated that the effect of Minimum wages on the firm’s behavior is a strong area to be studied as it determined the company’s productivity and operations.

Two studies on Impact of National Minimum Wages were carried out by Draca et.al and Galindo-Rueda Perira in Britain in which they explore the impact of NMW firm’s productivity. The findings of the study reveal that the implication of NMW has results in decreasing the profitability of many firms’ especially small firms. The results suggested that in terms of long term productivity this concept might have a significant effect on the behavior of employees but they don’t seem to be beneficial for achieving long term targets of productivity (Bondibene & Riley, 2013). 

However the results of these studies cannot be applied universally as there are limitations to their studies. They were carried out within small time frame and the data just comprise of industrial information. Generally it was found that by increasing the labor productivity, the companies raise their capital which in turn effects positively on their overall industrial performance. (Wincenciak, 2010). There is still a rift between different theorist as some think that setting National Minimum Wages will affect the productivity while some think there is not such significant relationship exist between these two variable. (Relly, 2013). The subject that how the National Minimum Wages actually effect the employment system and the firm’s productivity is still need to be discussed and explored more.

National Minimum Wage and Firm’s Response

The incorporation of National Minimum Wage has helped to increase the labor cost by raising the earnings of low paid workers (Wage, 2014). However there are not many studies available to support the fact that NMW has actually effect the overall operating behavior of employees. Contrary many small firms react negatively to this change as their resources does not support them to increase the wages of their employees thus they have to cut their overall profit margins. Several researches had been conducted after the introduction of NMW in 1999 to analyze the relationship of National Minimum Wages with employees and firms productivity (Wincenciak, 2010). 

The prominent among them was of research carried by Rabecca Riley and Chaira Rozza. Their findings indicate that the insinuation of NMW results in the high labor costs in small firms since 2000. However the employees were still paid average during the recession time. In addition they also report that small firms also responded to these changes as they claim to add more value amount per employees to raise their efficiency and productivity. (Wilson, 2012). Many researchers believed that the basic purpose of this change was that the companies wanted to increase their capital and production outputs through investing in their labor force. This investment helps to utilize their full potential that will ultimately help the company.

Strategies to Improve Company’s Productivity

Despite of the circumstances or situations the main goal of an organization is to incorporate strategies that results in increasing the overall productivity. The initiative of Minimum Wages was a step to motivate the workers in order to achieve their full potential which in return affects their performance and firm’s productivity (Bewley, 2015). In addition of incorporating NMW there are some other strategies that companies can follow to increase the output of their workers such as work speed, quality and work volume (Portes, 2015). These include:

• Providing incentives and bonuses to their employees, this helps them to retain their efficient workers and motivate them to work towards the organizational goals. In addition companies hire employees who are skilled and experienced and motivate them through incentives. They practice effective retaining policies in their HR department for continuous and effective performance.
• Companies undergo different training and educating programs for their managers to enhance their leadership skills so that they can effectively lead their team towards organizational goals.

There are many other strategies which will later be discussed in the study.

Chapter 3: Methodology

The methodology chapter will include the data collection techniques that will carry out to collect the relevant data. In this type of research which is based on case studies, the methodology will include the summary of literature and the case studies that will be explained in the research. Primary research may not be conducted, as this moment that researcher feels that sufficient secondary data is readily available to address the research questions

Chapter 4: Findings and Analysis

Findings and analysis chapter will present the major findings and results of the study. They will be achieved through extensive literature review and review of case studies in this field. It is expected that that research findings will justify the objectives set earlier for the study. There might be a chance that the result will vary a little from the research objectives due to different circumstances in which the researches were carried out. However the aim of the research is to relate the results with research hypothesis and objectives.

Chapter 5: Discussions and Conclusions

Following the finding and analysis chapter will be the Discussion and Conclusion chapter. This chapter will include the researcher’s views on the study’s findings and results. All the discussion will be done in the light of previous researches and references will be provided to support the research’s findings. In the end a brief conclusion will be presented that will summarize the whole research. This chapter will definitely clear the outline of relationship between productivity and Minimum National Wages.

References

Aslam, N., 2003. Level of Real Wages and Labour Productivity in the. The Pakistan Development Review, XXII(4), pp.284-87.

Bewley, H..P.J., 2015. Press Release: The Impact of the National Minimum Wage on Productivity, Business Performance and Employment. National Institute ofEconomic and Social Sciences.

Bondibene, C.R. & Riley, R., 2013. The Impact Of The National Minimum Wage On Firm Behaviour. National Institute of Economic and Social Research.

Curtiss, W.M., 1963. Foundation of Economic Education. [Online] Available at: http://fee.org/freeman/wages-and-productivity/ [Accessed February 2016].

Georgiadis, A.P., 2006. Is the Minimum Wage Efficient? Evidence of. Bristol: Centre for Market and Public Organisation.

Portes, J., 2015. [Online] Available at: http://www.niesr.ac.uk/media/press-release-impact-national-minimum-wage-productivity-business-performance-and-employment#.VpIS_vkrLIV [Accessed February 2016].

Relly, R., 2013. The Impact Of The National Minimum Wage On Firm Behaviour. National Institute of Economic and Social Research.

Wage, N.M., 2014. Economics.Help. [Online] Available at: http://www.economicshelp.org/labour-markets/minimum-wage/ [Accessed February 2016].

Wilson, M., 2012. The Negative Effects of Minimum Wage Laws. Washington: CATO Institute.

Wincenciak, L., 2010. Lecture 3 Efficiency wages. [Online] Available at: http://coin.wne.uw.edu.pl/wincenciak/docs/makro_zaawansowana/lecture_3.pdf [Accessed February 2016].