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					INVITATION TO TENDER                                     Reference Number: 7/1

NON-PAY BENEFITS IN LOW-PAYING SECTORS

Project Summary

1. The Low Pay Commission (LPC) invites tenders for a study to examine the
   provision of non-pay benefits within low-paying sectors. The project
   should pay particular attention to benefits provided via a „salary sacrifice‟1
   arrangement and to employer-provided accommodation. It should focus
   on those low-paying sectors where non-pay benefits are most common.

Background

2. The LPC considered the treatment of benefits-in-kind under the minimum
   wage in its first report (1998). In the occasional paper, Pay Structures and
   the Minimum Wage (1999), the LPC concluded that the non-pay benefits
   received by low-paid workers were limited and that most were paid a
   simple hourly rate with few additions to their pay package. In line with the
   Commission‟s recommendations to Government, the National Minimum
   Wage Regulations 1999 do not allow any benefits-in-kind to count towards
   the calculation of pay for minimum wage purposes, with the single
   exception of accommodation (up to a maximum daily limit, known as the
   accommodation offset). One consequence of this is that if workers on or
   near the minimum wage were to participate in salary sacrifice schemes,
   their pay would drop below the minimum wage and their employer would
   be acting unlawfully. The LPC now wishes to review the treatment of
   benefits-in-kind under the National Minimum Wage legislation, including
   where they are provided via a salary sacrifice arrangement.

Aims and Objectives

3. The aim of the project is to examine the extent to which non-pay benefits,
   including accommodation, are a feature of remuneration packages for
   workers in low-paying sectors and the extent to which this has changed
   since the introduction of the minimum wage. In its 2005 Report, the LPC
   identified nine low-paying sectors. The LPC will review these shortly and
   further sectors may be identified. The study should comment on any
   trends in non-pay benefits for low-paid workers since the introduction of
   the minimum wage and set these in the context of broader developments
   in remuneration across other sectors of the workforce. Although the focus
   of the study should be on non-pay benefits, contractors may also wish to
   comment on any significant issues relating to cash benefits. Specifically
   the research should explore:


1
  A salary sacrifice happens when an employee gives up the right to receive part of the cash
pay due under his or her contract of employment. Usually the sacrifice is made in return for
the employer‟s agreement to provide the employee with some form of non-cash benefit. The
„sacrifice‟ is achieved by varying the employee‟s terms and conditions of employment relating
to pay. (HM Revenue and Customs salary sacrifice guidance, www.hmrc.gov.uk)


                                                                                            1
       the types of non-pay benefits offered in low-paying sectors, the
        frequency with which they are offered and their value relative to the
        overall remuneration package;

       the provision of benefits via salary sacrifice arrangements in low-
        paying sectors, including the types of scheme, the frequency with
        which benefits are offered by this means, the number of workers
        involved, and the amount of salary sacrificed;

       the provision of accommodation, including use of the
        accommodation offset and charges made for accommodation and
        related provision;

       any influence of the minimum wage on employer decisions relating
        to the provision of non-pay benefits;

       the underlying reasons why employers choose to offer non-cash
        benefits, including any wider organisational benefits or savings
        identified, such as reduced staff turnover;

       any differences between the non-pay benefits received by low-paid
        workers and higher paid workers within the sectors or firms
        examined.

Research Methods and Data Sources

4. Potential contractors should specify: how they will obtain the data needed
   to explore the issues raised above; the sampling frame to be used; the
   time frame to be covered and the techniques they will use to analyse and
   present the data. Researchers should comment on the feasibility of
   obtaining the information specified above, and highlight potential problems
   or gaps. Researchers should bear in mind that, of the low-paying sectors
   examined by the LPC, non-pay benefits are thought most likely to feature
   in the retail and hospitality sectors. The provision of accommodation is a
   particular feature in the hospitality sector.

5. This is a wide-ranging project, and the LPC is willing to consider proposals
   by potential contractors to analyse in more depth particular sectors or
   groups of workers, or to focus on particular benefits-in-kind.

Proposed Timetable

6. The timetable for the project is as follows:

      Deadline for submission of tenders:         17 June 2005
      Selection of contractor                     4 July 2005
      Agreed Final Report                         25 November 2005




                                                                              2
7. Potential contractors should provide a provisional timetable to meet the
   above requirements and take account of the following stages of project
   design, fieldwork and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide/questionnaire.
    Main fieldwork.
    Presentation of intial findings. Researchers will be asked to give a
     short presentation at the Low Pay Commission‟s meeting on 8
     September 2005.
    Presentation of draft final report.

   The contractor can expect comments on initial drafts of the report, and the
   timetable should allow for subsequent revisions.

Outputs

8. The initial primary audience for this work will be the LPC. The main
   output of the study will be a report, detailing the aims and objectives of the
   research, the methodology adopted and the main findings. The report
   should include a brief Executive Summary. Ten bound copies of the final
   report and an electronic copy (preferably Word and pdf format) for the
   LPC website will be required. The LPC will make the findings publicly
   available.

Estimate of Costs

9. Tenders should give an indication of the costs accrued at different points
   in the timetable, and the costs of different elements of the research
   project.




                                                                                 3
INVITATION TO TENDER                            Reference Number: 7/2

A STUDY OF MIGRANT WORKERS AND THE NATIONAL MINIMUM
WAGE AND ENFORCEMENT ISSUES THAT ARISE.

Project Summary

1. The Low Pay Commission (LPC) invites tenders for a study to examine
any interactions that arise between the increased number of lawful migrants
working in the UK in recent years and the operation of the National Minimum
Wage. This project is not directly concerned with illegal migrant workers. The
questions the research will seek to address include:

    the effect of an increased number of migrant workers on the operation
     of the National Minimum Wage, including the impact of both migration
     and the minimum wage upon the supply of labour in low-paying
     sectors.
    whether migrant workers are exerting a disproportionate influence at
     the bottom end of the earnings distribution, or whether they are
     principally exerting an influence higher up.
    the extent to which migrant workers gravitate towards specific sectors
     of the economy, including low-paying sectors.
    whether there is a tendency for wages, particularly in low-paid sectors
     of the economy, to be lower in regions where migrants are liable to
     cluster (such as London) than in regions that tend not to attract
     significant numbers of migrants.
    whether there are minimum wage enforcement issues specific to
     migrant workers. For instance, is there a ready supply of migrant
     workers prepared to work for less than the minimum wage? If so, is this
     more prevalent in some low-paying sectors than others? Are there any
     general characteristics that identify migrant workers more likely to
     accept pay below the minimum wage e.g. country of origin, age or
     gender?
    whether there is any tendency on the part of migrant workers to be
     unaware of their rights under minimum wage laws, thus rendering them
     more vulnerable in the workplace.
    whether the experience of workers from the accession countries to the
     EU, who registered with the Worker Registration Scheme, provides any
     insight into these questions.

Background

2. Since its inception, the Commission has sought to understand the
interaction between migration and the minimum wage. It has included in its
annual visit programmes those who might have knowledge of such issues.
The recent enlargement of the EU and the significant increase in lawful
economic migration may present an excellent opportunity to observe the
interaction.




                                                                                 4
Aims and Objectives

3. The aim of the project is to map out the dimensions of current migration
and the pay levels of migrant workers in the context of the overall distribution
of earnings. Are migrants exerting a disproportionate influence at the bottom
end of the earnings distribution, or is it the case that, as some data suggest,
migrant workers pay higher than average levels of taxation indicating that their
influence is principally felt higher up the earnings distribution? Is there any
indication that migration leads to labour market pressures that would drive
wages below the existing minimum wage rate? The LPC would also like to
learn whether there are any enforcement issues surrounding the minimum
wage that are provoked by migration.


Research Methods and Data Sources

4. In deciding on the awarding of the project, the LPC will be especially
interested in the researchers‟ accounts of what data sources they intend to
use, and how they propose to overcome data limitations in the area. One
idea that researchers may wish to explore is the possibility of tapping into the
Worker Registration Scheme data, and monitoring the outcomes of those
workers who have registered. Potential contractors should specify the time
frame to be covered and the techniques they propose to use to analyse and
present the data.


Proposed Timetable

5. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

6. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.


                                                                                   5
7. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.

Outputs

8. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

9. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                                6
INVITATION TO TENDER                            Reference Number: 7/3

AN INVESTIGATION OF THE APPROPRIATE METHOD FOR THE
CALCULATION OF THE COVERAGE OF UPRATINGS TO THE NATIONAL
MINIMUM WAGE

Project Summary

1. The Low Pay Commission (LPC) invites tenders for a study to review the
methodology employed in the calculation of the number of beneficiaries and
the extent of coverage of the National Minimum Wage (NMW). Is the best
approach to project the whole earnings distribution forwards to the date of the
most distant uprating, or is the current practice employed by the LPC and
others of deflating the uprated values of the NMW back to the date of the
most recent ASHE data the most satisfactory? Both approaches require an
assumption about the counterfactual for earnings growth – i.e. by how much
earnings of the low paid would have increased in the absence of any
intervention in the form of the NMW. Researchers will therefore also be asked
to comment on the most suitable way to deal with the counterfactual
assumption for earnings growth. As part of the study, researchers will be
required to undertake a review of the LPC‟s forecasting history with respect to
coverage, to the extent that the available data permits such a review to be
undertaken.

Background

2. Throughout the history of the Commission this has been an important
issue that has prompted much discussion. For example, in its 2005 Report,
the Low Pay Commission (p12, para 2.5), stated that “our forecasts of
prospective beneficiaries („forward looking estimates‟) have tended to predict
a higher number of beneficiaries than calculations made after an uprating has
been introduced („post uprating estimates‟)”. In an accompanying footnote,
the LPC explained that “it should be noted that, although we carry out these
estimates after the upratings have been introduced, we use data from the
mid-April that precedes the upratings”, implying that these estimates are
never backward looking in the strictest sense. In the Report the LPC
suggested three reasons for the divergence between forward and more
backward looking estimates. The task of the researchers would be to
investigate this issue further.

3. An aspect of this investigation may be the marked sensitivity displayed by
some methods to the counter-factual assumption about the earnings growth of
the low paid in the absence of an uprating to the minimum wage. Whatever
variables researchers select to be incorporated as part of their proposed
methodology, it is important that uncontroversial forecasts for this variable be
readily available, such as from the Treasury‟s survey of independent
forecasters. Researchers may also find it useful to draw a distinction between
“coverage” – those paid at or around the minimum wage – and “beneficiaries”
– those who it can be established would have been unlikely to have received
an average pay award in the absence of an uprating to the minimum wage. It


                                                                              7
may be that the increase in the NMW in 2002 having been significantly less
than average earnings may provide the data needed to study this.

Aims and Objectives

4. The aim of the project is for researchers to advise on the advantages and
disadvantages of different methods that could be used in the calculation of
beneficiaries, and provide an indication as to which might prove to be the
most satisfactory in practice, taking account of pragmatic considerations such
as the speed and ease with which estimates of coverage might be arrived at.
Also, in the process of doing so, to provide a cogent explanation as to why the
methodology currently employed in the calculation of coverage lends itself to
ex-ante estimates exceeding ex-post estimates. In the process of arriving at
their findings, researchers should make a recommendation as to whether
projecting the entire earnings distribution forward to the date of future
upratings, or the current methodology of deflating the uprated values of the
minimum wage to the date of the most recent ASHE data, is likely to prove
most suitable for use by the LPC in future reports.

Research Methods and Data Sources

5. The principal data source for the study is likely to be the Annual Survey of
Hours and Earnings (ASHE) data, possibly supplemented by the New
Earnings Survey Panel data (NESPD), and data generated by the LFS. It may
also be possible to draw on international experience in this regard, although
this would not be a major focus of the study. Potential contractors should
specify how they will employ these sources of data and any others in order to
explore the issues raised above; the sampling frame to be used; the time
frame to be covered and the techniques they will use to analyse and present
the data. Researchers should highlight any potential problems or gaps likely
to be encountered in the data.


Proposed Timetable

6. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

7. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:




                                                                                8
    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

8. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.

Outputs

9. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

10. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                                  9
INVITATION TO TENDER                             Reference Number: 7/4

THE SECTORAL AND REGIONAL EFFECTS OF THE 2003 AND 2004
MINIMUM WAGE UPRATINGS ON EMPLOYMENT, HOURS, PROFITS,
PRODUCTIVITY, AND BUSINESS START-UPS AND FAILURES

Project Summary

1. The Low Pay Commission (LPC) invites tenders for a quantitative study of
the impact of the 2003 and 2004 upratings to the minimum wage –
highlighting the effects on employment, hours, productivity, profits, and prices.
The impact on firms is of particular interest – the study should measure and
analyse how firms within low-paying sectors such as retail and hospitality
have responded to the upratings to the minimum wage. Also of interest is the
impact on business start-ups and failures. This project should also investigate
whether or not there have been differing regional and sub-regional effects of
the upratings.

Background

2. The National Minimum Wage (NMW) has been in place for six years, and
over that time the LPC has monitored its impact and, in particular, the
response of firms in low-paying sectors. Individual firms may take a variety of
actions in response to the minimum wage. These could include changes in
operational arrangements such as reductions in employment or hours,
measures to improve productivity or quality of service, increased use of
technology, increased training and changed work organisation; increased
prices; or an acceptance of lower margins. The LPC‟s 2005 Report presents a
recent assessment of these responses and shows that, as in previous years,
there is little evidence at the aggregate level to suggest any significant overall
impact of the minimum wage on employment, productivity, and the general
level of prices. Researchers have uncovered a moderate effect on the profits
of low-paying firms, but no accelerated pace of business failures.

3. Of increasing interest is the regional impact of the minimum wage. For
example, is the impact of the minimum wage different in poorer regions where
the market clearing level of the wages of those in low-paid occupations may
be below the minimum wage, compared to those regions where endemic
labour shortages have had the effect of driving up market clearing wages to
levels that may exceed the NMW?

Aims and Objectives

4. The aim of this study is to provide a quantitative picture of the specific
impacts that the minimum wage has had on employment, hours worked,
productivity and profitability at a sectoral level, as well as an account of any
change in the pattern of business start-ups and failures. The study should
focus on the key low-paying sectors identified in the Commission‟s 2005
Report. These were the manufacture of Textiles, Clothing and Footwear,
Retailing, Hospitality, Security, Cleaning, Childcare, Residential Social Care,


                                                                               10
Hairdressing and Agriculture. Retail and Hospitality are the most dominant
sectors for low-paying employment.


Research Methods and Data Sources

5. Researchers should specify the data source(s) to be used and indicate the
feasibility of obtaining reliable estimates from existing data. The LPC is open
to the use of new data sources or methodologies. Researchers should
indicate what level of Standard Industrial Classification (SIC) – which has
better data – or Standard Occupational Classification (SOC) – which is more
relevant for the identification of the low-paid – they plan to use and the time
frame to be included in the analysis, which will encompass the 2003 and 2004
upratings. They should also suggest how they will explore explanations for
key findings and in particular how they will isolate the effects of the minimum
wage from other changes relevant to each sector.

Proposed Timetable

6. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

7. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

8. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.




                                                                               11
Outputs

9. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

10. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                              12
INVITATION TO TENDER                             Reference Number: 7/5

MODELLING THE CHANGING SHAPE OF THE EARNINGS
DISTRIBUTION AS THE NATIONAL MINIMUM WAGE IS UPRATED

Project Summary

1. The project should examine how the shape of the earnings distribution
flexes when the minimum wage impacts upon it, particularly focusing on the
position of those towards the bottom. Up until now, the Low Pay Commission
has primarily used measures such as “bottom decile as a percentage of the
median” as a means of capturing this effect. However, researchers are invited
to propose more sophisticated techniques for presenting this issue.
Researchers could, for example, model stylised income distributions, such as
log-normal distributions, and then plot how the shape of the earnings
distribution changes in response to upratings of the minimum wage, which
would also give an indication of how far up the earnings distribution the effect
permeates.

Background

2. Research done by the LPC, as published in its 2005 Report , and
demonstrated in subsequent internal papers, has shown a strong effect of the
minimum wage at the bottom of the earnings distribution. At the same time, it
has been suggested by some that a portion of the relative gains achieved by
the low paid in relation to the rest of the earnings distribution may be
attributable to a relative shift in the demand for low-paid labour, rather than
the minimum wage per se. The project would help to disentangle the
competing effects. At the same time, if there is some effect on differentials,
with firms raising the wages of those paid more than the minimum wage in
response to upratings of the minimum wage in order to preserve differentials,
the project would also show how far up the earnings distribution the minimum
wage impacts. This would also help to pin down and clarify estimates of
coverage. In particular, a study such as this might lend itself towards
projecting the earnings distribution forwards as a means of gauging the extent
of coverage of the most recent upratings to the minimum wage, as opposed to
the current method of deflating the uprated values of the minimum wage back
to the date for which most recent data is available.

Aims and Objectives

3. The aim of the project is to employ sophisticated techniques, econometric
or otherwise, to model the changing shape of the income distribution in
response to upratings to the minimum wage. In so doing, the project will
uncover how far up the earnings distribution variations in the minimum wage
impact, and will also shed a clearer light on the, at times, empirically elusive
concept of coverage.




                                                                               13
Research Methods and Data Sources

4. The most likely source of data is the ASHE data, and data from the LFS.
Although the publication of the ASHE data has resulted in an improvement in
the quality of the low pay statistics, researchers should indicate how they
propose to use the available data for the study, and how they propose to
overcome any remaining limitations of the data. The time frame for the study
should also be specified.

Proposed Timetable

5. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

6. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

7. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.




                                                                               14
Outputs

8. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

9. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                              15
INVITATION TO TENDER                             Reference Number: 7/6

ADJUSTING WORK ORGANISATION TO COMPRESSED PAY
DIFFERENTIALS

Project Summary

1. To investigate the ways in which firms modify their organisational
structures, including systems of incentives and rewards, in response to
compressed pay differentials following an uprating to the National Minimum
Wage (NMW).

Background

2. The LPC has received some evidence, mainly anecdotal or related to
particular firms, that compressed pay differentials following an uprating to the
minimum wage force businesses to re-organise work structures as a result.
The most important result of this re-organisation of working practices is, it is
claimed, the loss of motivational incentives. However, the LPC has also
received evidence that the compression or elimination of pay differentials has
led some employers to radically redesign their work structures and increase
efficiency through training and multi-skilling, or by introducing new incentives.
We have heard of examples of this occurring in large retailers who removed
several layers and replaced them with one multi-skilled basic shop assistant
grade. Another sector which may prove to be a fruitful source of data for this
study is the restaurant sector. The LPC has been told that some restaurant
kitchens with traditional hierarchical pay structures have radically reorganised
their work structures in response to compressed differentials. The LPC
therefore wishes to investigate the impact of reduced differentials in more
depth.

Aims and Objectives

3. The aim of the project is to provide a quantitative and qualitative account of
how recent upratings to the minimum wage have squeezed pay differentials,
and how firms have reorganised their working structures in response.
Employer organisations sometimes make the case that following a significant
real increase to the minimum wage, firms need a “breather” or respite from
increases to the minimum wage for a year, in order to enable them to restore
differentials.

Research Methods and Data Sources

4. Researchers should indicate how they propose to gather data for the
study, how they intend to make use of this data, and how they propose to
overcome any remaining limitations of the data. The time frame for the study
should also be specified.




                                                                               16
Proposed Timetable

5. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

6. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

7. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.

Outputs

8. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

9. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                               17
INVITATION TO TENDER                              Reference Number: 7/7

THE EFFECT OF THE MINIMUM WAGE ON EMPLOYMENT AND PROFITS
IN AN ECONOMIC RECESSION

Project Summary

1. The Low Pay Commission (LPC) wishes to explore the potential impact of
the National Minimum Wage (NMW) on key variables should there be a
downturn in the economy. Of particular interest would be the effects on
employment outcomes for the low-paid, as well as the profitability of firms,
and business start-ups and failures.


Background

2. Research the LPC has commissioned has consistently produced the
reassuring finding that, since its inception, the National Minimum Wage has
had minimal, if any, detrimental consequences on the employment variables
of the low paid. This means that, with no shrinkage of employment levels or
hours worked, the low paid have enjoyed substantial increases in earnings as
a result of the minimum wage. However, it is also widely recognised that the
period since the inception of the minimum wage has been a propitious time
economically, characterised by continuous economic expansion and ever-
higher total employment levels. The LPC is mindful of the possibility that the
impact of the minimum wage might prove less benign were the business cycle
to enter a downturn.

Aims and Objectives

3. The aim of the project is to employ techniques, econometric or otherwise,
that would enable the construction of a plausible scenario demonstrating the
likely effect of the NMW in an economic downturn on the employment
outcomes of low-paid workers and the profitability of firms.


Research Methods and Data Sources

4. Potential contractors should specify the techniques that they intend to
employ. These might include cross-country comparisons using OECD data, or
a focus on regions of the UK which have not kept pace with the prosperity in
the rest of the economy, should these exist, or econometric simulations.

Proposed Timetable

5. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006


                                                                           18
       at research workshop
       Interim reports                           Date to be agreed on an
                                                 individual basis with contractor
       Agreed final report                       29 September 2006

6. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

7. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.

Outputs

8.. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

9.. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                              19
INVITATION TO TENDER                            Reference Number: 7/8

INFLOWS AND OUTFLOWS FROM THE NATIONAL MINIMUM WAGE

Project Summary

1. The Low Pay Commission (LPC) invites tenders for a project to explore
the dynamics of the National Minimum Wage (NMW) and to assess inflows to
and outflows from the minimum wage.

Background

2. Previous reports of the LPC have used official data sources, notably the
Annual Survey of Hours and Earnings (ASHE) data, the New Earnings Survey
(NES), NES Panel Data (NESPD), data from the British Household Panel
Survey (BHPS), and the Labour Force Survey (LFS) to estimate the number
of individuals who benefit from the NMW. The data sources underlying these
estimates are based on a sample of people at a point in time, which provide
an indication of the number of people who might gain from the minimum wage
at a given point. But these data do not provide an indication of how the
number of beneficiaries of the minimum wage changes throughout the year,
either because earnings of workers rise above the minimum, or more people
join the labour market at the level of the minimum.

3. The LPC would like to commission research which examines the dynamics
of the minimum wage. The research would explore the relationship between
the stock of beneficiaries at a particular point in time, and the flow of
beneficiaries over time. We wish to explore where people go from the
minimum wage – whether it is used as a stepping stone to higher wages, or
whether the low paid are trapped in a low-pay, no-pay cycle – and to examine
the factors underlying the different outcomes. The research should examine
durations of work paid on or around the minimum wage and the
characteristics of people with different durations.

4. The LPC commissioned similar research in 2004, which is now published
on our website. However, that study examines this topic over a one year time
period. The LPC would like to build on the earlier work by commissioning
research to cover these inflows and outflows over a longer time frame.
Specifically, the questions the LPC wishes to answer are what portion of
minimum wage earners become long-term recipients of the minimum wage?
What are their characteristics in terms of position in the household, levels of
education, gender, work status (full-time or part-time?), recent migrant? etc.


Aims and Objectives

5. The aim of the study is to explore the dynamics of the NMW and to link this
to the LPC‟s point in time estimates of beneficiaries of the minimum wage.
Specifically the research should examine:



                                                                             20
        Total inflows into and outflows from the minimum wage over the
         specified period, split by whether on the adult minimum or the youth
         Development Rate. The research should link inflows and outflows
         information to point in time estimates, and provide an indication of
         average durations on the minimum wage, or the distribution of
         durations.
        The characteristics of those who flow on and off the minimum wage,
         looking at factors such as age, sex, ethnic origin, sector, education
         status, whether or not a migrant, and possibly region. The analysis
         should explore the factors associated with shorter or longer
         durations on the minimum wage.
        Destinations of those leaving minimum wage employment. Does
         the NMW act as a stepping-stone to higher pay, or are minimum
         wage earners more likely than non-minimum wage earners to flow
         in and out of low pay, unemployment and inactivity?
        The factors associated with moves from the minimum wage into
         higher pay and into non-employment.


Research Methods and Data Sources

6. The study should use individual-level survey data, such as the British
Household Panel Survey (BHPS) or the New Earnings Survey Panel Data
(NESPD), with a longitudinal element to examine the dynamics of the
minimum wage as specified above. Researchers should also highlight how
these estimates differ from the official low pay estimates derived from ASHE,
NES and LFS.

7. The methodology should discuss the advantages and disadvantages of
using different data sources for this work, and specify what statistical
techniques will be used to analyse the data. Contractors should specify the
time period of the data to be analysed, in line with the timetable given below.

Proposed Timetable

8. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

9. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:




                                                                               21
    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

10. The contractor can expect comments on initial drafts of the report, and
the timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.

Outputs

11. The initial primary audience for this work will be the LPC. The main
output of the study will be a report, detailing the aims and objectives of the
research, the methodology adopted and the main findings. The report should
include a brief Executive Summary. Ten bound copies of the final report and
an electronic copy (preferably Word and pdf format) for the LPC website will
be required. The LPC will make the findings publicly available, in particular on
the LPC website, and a synopsis of the report will be included in the 2007
Report of the LPC.

Estimate of Costs

12. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




                                                                              22
INVITATION TO TENDER                              Reference Number: 7/9

NEW RESEARCH TOPICS IN RELATION TO THE NATIONAL MINIMUM
WAGE

Project Summary

1. The Low Pay Commission (LPC) invites tenders from researchers with
ideas for new research that could fruitfully be carried out in relation to the
National Minimum Wage (NMW), and which would prove to be a suitable
project for the LPC to commission.

Background

2. The LPC recognises that there may be areas of investigation worth
pursuing that we have not yet identified, or which have not previously been
considered in great depth. Researchers who believe that they have a
worthwhile proposal that would fall into these categories are welcome to
submit it for consideration.


Aims and Objectives

3. To fill any gaps in the LPC‟s knowledge that may exist and of which to LPC
is presently unaware; to address the “unknown unknowns”, or to examine
areas which have not been considered in any great depth in the literature.

Research Methods and Data Sources

4. The methods and data used will be entirely dependent on the project, and
these should be specified in detail by the prospective researchers.

Proposed Timetable

5. The timetable for the project is as follows:

       Deadline for submission of tenders:        15 August 2005
       Selection of contractor                    Mid-September 2005
       Presentation of initial findings           September 2006
       at research workshop
       Interim reports                            Date to be agreed on an
                                                  individual basis with contractor
       Agreed final report                        29 September 2006

6. Potential contractors should provide a provisional timetable to meet the
above requirements and take account of the following stages of project design
and reporting:

    Finalising the contract. Initial meeting with LPC Secretariat to finalise
     timetable, scope and working arrangements.


                                                                                 23
    Submission of draft topic guide.
    Main analysis.
    Submission of interim report.
    Presentation of initial findings, date to be agreed on an individual basis
     with contractor.
    Presentation of draft final report.

7. The contractor can expect comments on initial drafts of the report, and the
timetable should allow for subsequent revisions. The contractor will be
expected to participate in a one-day seminar in September 2006, in which
they will be invited to present provisional findings to a group including
academic experts as well as members of the LPC.

Outputs

8. The initial primary audience for this work will be the LPC. The main output
of the study will be a report, detailing the aims and objectives of the research,
the methodology adopted and the main findings. The report should include a
brief Executive Summary. Ten bound copies of the final report and an
electronic copy (preferably Word and pdf format) for the LPC website will be
required. The LPC will make the findings publicly available, and a synopsis of
the report will be included in the 2007 Report of the LPC.

Estimate of Costs

9. Tenders should give an indication of the costs of different elements of the
research project, and the accruals timetable. It is envisaged that payment will
be made by the LPC in tranches, on completion of key stages of the project.




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