Regional Labour Market Influences on Managerial Remuneration in Small and Medium-sized Enterprises in England: An Empirical Analysis

Abstract

This paper empirically examines the factors that determine managers' remuneration in a sample of 97 UK small and medium-sized enterprises (SMEs). The sample was partitioned into two groups, one comprising of 69 managers working for firms located in the South East (SE) economic planning region and the other comprising 28 managers working for firms located in 'other English regions' (OR). The average remuneration of managers located in the SE in the latter half of 1988 was £30 000 whilst for those located in the OR their remuneration was significantly less and averaged only £17 500 for the same period. Several wage equations were then estimated to determine if this difference in remuneration was due primarily to differences in the managers' human capital and/or employing-firm characteristics or whether, after con trolling for these factors, it was possible to detect a significant independent locational influence. The results indicate that both human capital (primarily the managers' age and qualifications) and firm/job-specific factors (their relative workloads, the size and growth of the firm in terms of assets) and the location of their employing firms were able to explain a large proportion of the variance in remuneration. Though the locational effect was statistically significant, after controlling for differences in human capital and job/firm-specific factors, the remuneration of the SE managers was estimated to be only some £3000 higher than that of managers located elsewhere in England.