Minimum Wage, Minimal Effect: The Impact of the National Minimum Wage on Small Regional Hotels

Article excerpt

Since the Conservative government abolished the hospitality Wages Councils in 1993 a debate has raged about the impact of wage floors on employment in the hospitality sector. The Labour party, then in opposition, promised a reform of unregulated wages in the United Kingdom (UK) in the form of a National Minimum Wage (NMW). Since this was suggested a fierce debate has taken place both about the levels of the NMW and the impact it would have on small hospitality firms--the anti-minimum wage camp suggesting that the NMW would cause numerous job losses and some small firms to crease trading. This paper suggests that this is no more than "hollow rhetoric" and is supported by little or no evidence. Interviews conducted in Shropshire over a 3-year period during the planning and introduction of the NMW show that there has been no significant change in small hospitality firm failure in the Shropshire area. Nor has there been any significant increase in unemployment in the hospitality sector. In fact, in the case of employment there has been a significant increase in hospitality employment within the case study hotels. The Stage 3 interviews in the Shropshire study (post NMW implementation) have produced evidence to suggest that hoteliers in the study have been very resilient and that with plenty of warning from the government and some employee restructuring have circumvented the impact of the NMW.


The selected findings in this paper are from a research project conducted in small hotels in Shropshire from 1997 to 2000. The focus and aim of this study was to investigate the impact of the National Minimum Wage (NMW) on the management practices of small hospitality firms. The catalyst for this study was the fierce debate and rhetoric surrounding the NMW. The method used to collect the primary data was face-to-face interviewing. This is a longitudinal study in that it was intended to interview the same small hotel owners over a 3-year period twice before the introduction of the NMW and once after.

The Stage 1 interviews were conducted in the summer of 1997, in an environment of limited knowledge about the forthcoming NMW legislation. Following this the second interviews were conducted in 1998 in a still uncertain and changing environment surrounding the forthcoming NMW. Finally, the Stage 3 interviews were conducted in the late summer of 1999 post NMW implementation. The introduction of a minimum wage is arguably the most significant government intervention in private sector pay-setting since the ill-fated prices and incomes policies of the 1970s (Industrial Relations Service; IRS, 1997).

In fact, as late as the autumn of 1996 it was not clear whether the United Kingdom (UK) would ever see a NMW as the then Conservative Government was in favour of a completely unregulated remuneration and labour market. After all, it was the Conservative Government who abolished the hospitality wages councils in 1993--much to the applause of employers in the hospitality sector. However the Labour Government, then in opposition, was in favour of introducing a NMW in the UK and this was a cornerstone of their election manifesto. However, on the 1st May 1997, the Labour Party won the UK general election and the prospect of a NMW in the UK took another step towards becoming a reality.

Historical Background to the National Minimum Wage Debate

The proposal to implement a NMW has been one of the most controversial and intensely discussed aspects of the Labour Government's pay and employment policies. Most discussion prospect of a NMW to date ha on the method for calculating the level of such a minimum wage and its likely effects upon both employment and low paid sectors of the labour market (White & Conway, 1997). However, the contemporary hospitality literature suggests there has been much less attention paid to the past experience of minimum pay regulation in the UK or how such systems operate in other countries. …