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The Dynamics of Informality: Employment Relations in Small Firms and the Effects of Regulatory Change

Author

Listed:
  • Monder Ram

    (De Montfort University)

  • Paul Edwards

    (University of Warwick)

  • Mark Gilman

    (University of Kent at Canterbury)

  • James Arrowsmith

    (University of Warwick)

Abstract

This paper addresses two related issues: the effect of the `regulatory shock' of the National Minimum Wage on small firms and the consequent effects on the commonly observed practice of `informality'. It draws on a survey of such firms but primarily uses case study evidence from five firms to examine the processes at work. Detailed case studies of such firms remain rare, and they tend to analyse a largely unchanging world. We show how patterns of informality change over time. The regulatory shock had varying effects, as some firms moved up-market and others were pressed to the edges of the legitimate market and in some cases out of business altogether. In the firms moving up-market, informality was redefined into a more disciplined and formalised approach, while those going down-market relied even more heavily on family and other ties to survive. The NMW led to some improved wages, though there was also evasion, and it has sharpened the divide between the legitimate and illicit areas of business.

Suggested Citation

  • Monder Ram & Paul Edwards & Mark Gilman & James Arrowsmith, 2001. "The Dynamics of Informality: Employment Relations in Small Firms and the Effects of Regulatory Change," Work, Employment & Society, British Sociological Association, vol. 15(4), pages 845-861, December.
    • Handle: RePEc:sae:woemps:v:15:y:2001:i:4:p:845-861
    DOI: 10.1177/095001701400438233
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    References listed on IDEAS

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    1. Robert McNabb & Keith Whitfield, 2000. "‘Worth So Appallingly Little’: A Workplace‐Level Analysis of Low Pay," British Journal of Industrial Relations, London School of Economics, vol. 38(4), pages 585-609, December.
    2. Jill Rubery, 1997. "Wages and the Labour Market," British Journal of Industrial Relations, London School of Economics, vol. 35(3), pages 337-366, September.
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    Cited by:

    1. Michael Brookes & Philip James & Marian Rizov, 2018. "Employment regulation and productivity: Is there a case for deregulation?," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 39(3), pages 381-403, August.
    2. Colm McLaughlin, 2009. "The Productivity‐Enhancing Impacts of the Minimum Wage: Lessons from Denmark and New Zealand," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 327-348, June.
    3. Damian Grimshaw, 2010. "United Kingdom: Developing a Progressive Minimum Wage in a Liberal Market Economy," Chapters, in: Daniel Vaughan-Whitehead (ed.), The Minimum Wage Revisited in the Enlarged EU, chapter 14, Edward Elgar Publishing.
    4. Colin C. Williams & Friedrich Schneider, 2016. "Measuring the Global Shadow Economy," Books, Edward Elgar Publishing, number 16551.

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