When minimum wage increases impose a cost shock on employers of low wage workers, there are a variety of ways in which firms can adjust. Rather than study the main focal point of much minimum wage research, possible labour demand adjustment, this paper considers a more understudied angle. It examines whether firms can offset the cost shock through changing non-wage aspects of work related to the nature of work. This includes altering employment composition in the workplace, the use of alternative work arrangements and redefining job contracts. Whether these alter in response to minimum wages is studied through the lens of the UK?s 2016 National Living Wage (NLW) introduction. In terms of traditionally studied outcomes, the NLW boosted worker wages, but with no change in total employment. Instead, firms did indeed adjust operations through changes in employment composition and by altering employment contracts. These non-labour demand adjustments of employment relations show how employment stability can be maintained in response to minimum wages as employers can restructure work through within-firm job composition and contracts.

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20 April 2026     Paper Number CEPDP2173

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This CEP discussion paper is published under the centre's Labour programme.