Examination of Witnesses (Questions 180-199)
BRITISH CHAMBERS
OF COMMERCE
30 NOVEMBER 2004
Q180 Mr Hoyle: You have not answered
the question. Do you not think there is a whiff of hypocrisy?
The same people who are saying, "We don't like paying this
Minimum Wage increase at the lowest of low wages", yet they
are the same people who are usually taking 10 and 20% increases
on £200,000 a year. How does that match? What do you say
to them?
Miss Owens: If you look at average
earnings growth it is not 10 or 20% and if you look at some of
the increases in executive pay some of them have been high but,
as I say, average earnings growth in this country is about 3%—it
is actually higher in the public sector than it is in the private
sector which actually bumps it up—and if we are looking
at National Minimum Wage increases at double that, it is not in
line with the rest of the economy.
Q181 Mr Hoyle: But also I think there
is always the fact it has to be taken into account that if you
are in manufacturing and you are paying a reasonable wage and
you have a competitor who will always be dragging on the bottom,
you are always at a disadvantage. Surely we ought to be forcing
those up to make sure that the good employers are not suffering
from bad competition because they are not paying real wages.
Miss Owens: I think we have got
to the stage now with the National Minimum Wage that many more
businesses are paying around that level. It is not just those
employees who are being bumped up who are being affected. Pressure
and differentials across the board mean that business costs have
increased tremendously. That has come through to us in our survey
but also through talking to businesses.
Q182 Mr Hoyle: But good employers and
good businesses are paying above the Minimum Wage and the fact
that the competition is always coming from those who want to pay
the least, surely the good employers benefit from having the Minimum
Wage increase.
Miss Owens: Many are paying in
and around the Minimum Wage and frankly it is not something we
object to at all. We want a Minimum Wage to prevent exploitation.
We are happy with the Minimum Wage for 16 and 17 year olds at
around £3 an hour that was introduced in October this year.
Q183 Mr Hoyle: What do you think for
an adult with a family?
Miss Owens: Increasingly members
are telling us that they do not want to see a Minimum Wage above
£5.
Q184 Mr Hoyle: What do you think is a
fair rate for a family person?
Miss Owens: At the moment in terms
of the Minimum Wage our members are saying to us that they do
not want to see a Minimum Wage above £5.
Q185 Mr Hoyle: Do you agree with that?
Miss Owens: That is the BCC position,
yes.
Q186 Mr Hoyle: What about those employers
whom you represent who pay quite a bit above the Minimum Wage
whose competition is coming from those at the bottom end? How
do you justify it?
Miss Owens: Those who pay above
the Minimum Wage have to bump up differentials for their employees;
they have to bump up the amount their employees are being paid
above the Minimum Wage because they do not want to be seen necessarily
as a Minimum Wage employer. They have to raise their hourly rate
as well.
Q187 Mr Hoyle: So you think there is
benefit in the Government not subsiding people who are not being
paid a real wage through tax credits through all the other benefits
that have to be paid.
Mr Toye: I can see all your points.
We pay everybody significantly above the Minimum Wage but our
competition—and I receive at least one email a week—is
to send our software development to India where rates are much
lower.
Q188 Mr Hoyle: You are not suggesting,
are you, that we compete with the wages of a third world country
because that is where we came from in the beginning. We know we
cannot compete with third world wages or would ever want to compete
I am sure—we had better put this on the record—that
your organisation do not want to compete in the third world.
Mr Toye: Many of our competitors
have already outsourced their software development to those places.
Q189 Mr Hoyle: Can I just clear this
up because I think it is important for the record? Are you suggesting
that we should pay the same rates as India?
Mr Toye: No, I am not. I just
have to be aware of where our cost level is, that is all, where
the general cost level is because our suppliers will be paying
minimum rates for some things so it increases our costs.
Q190 Mr Hoyle: But overall you think
it has been a good success story, the Minimum Wage.
Mr Toye: Yes.
Q191 Chairman: What was the original
attitude of the BCC to the National Minimum Wage?
Mr Sidnick: We supported the introduction
of the Minimum Wage as long as it is set at the right level and
the level in 1999 was seen as reasonable but the level now is
creeping to become more unmanageable.
Q192 Chairman: It has been suggested
to me—and I only have anecdotal evidence of this—that
small, local employers in my constituency (people in the catering
industry, for example) say, "We like to keep to the Minimum
Wage but what we need is time to get that and therefore we appreciate
when the Commission announces that it will be 15 months or 18
months before the next increase". They then say they can
accommodate it. What I am at a loss to see is that you have gone
on a bit about differentials but I am trying to think of low paid
companies that have quite complicated salary scales. Do you normally
have a lot of people getting paid the National Minimum Wage and
a couple of management grades maybe far higher above that, but
it is a fairly flat company structure when you are talking about
very low paid industries, is it not?
Miss Owens: I think, for example
in the retail sector, there are a range of wage rates and certainly
when we have submitted evidence to the Low Pay Commission
it has come back that several pay rates have been impacted on
and these low costs are associated with each level on the pay
scale.
Q193 Chairman: We have never had any
expressions of concern from the Tescos or the Asdas of this world
which would tend, on the scale of their operation, to have more
in the way of rates that would result in there being a differentials
problem. As I understand it, the only part of the British economy
where this differentials issue has come out has been in care homes.
If you have six people on five different rates then maybe you
have something wrong with your business structure but if you have
50 people and they are doing a variety of jobs there might be
a problem there. What sort of businesses are we really talking
about here when we talk about differentials?
Miss Owens: In the retail industry
we have had also examples of this impact on differentials.
Q194 Chairman: Maybe you could send us
some evidence on that.
Miss Owens: Yes, of course.
Q195 Chairman: The other thing, of course,
is that it could be argued that the Commission does operate on
a kind of suck it and see process. Is your view that they have
got it wrong already, that a fiver a week is too high? Or that
the 8.5% rise which is envisaged for October of next year is going
to be a step too far? Is it a problem at the moment for most of
your members or is likely to become a problem next year?
Miss Owens: Using the example
of the last two rises we have asked the question, "Will it
affect your competitiveness? Will it have an impact on staffing
levels?" It has come back at over 50% saying that rises in
the round of 7.5% or higher would certainly have that impact.
It has also come back that some form of cap would be preferable.
Q196 Mr Clapham: Could I just explore
this argument of flexibility a little further? The real aim of
your argument seems to be that there should be no regulation at
all and no regulation would add to greater flexibility. Is that
correct? That seems to be what you are saying. Mr Sidnick referred
earlier to the surveys that have been done. Is there any information
coming in from the surveys that you have conducted which show
that that is precisely what your members want: non-regulatory
flexibility?
Mr Sidnick: It is not about having
no regulation; there is a need for regulation and there is a need
to protect employees' rights. What our survey is showing is that
the last three to five years have shown a significant increase
in the amount of regulation across a range of areas and that increase
is now becoming unmanageable. We have gone very fast very quickly
and it is becoming difficult.
Q197 Mr Clapham: Let us just take that
a step further. For example, if there was little in terms of regulation
in order to achieve flexibility we would be moving into a situation
where there would be greater collective bargaining. That would
add to a situation of more industrial democracy. Would you agree
that the trade unions should be freed up in order to be able to
bargain more freely in a situation where regulation was reduced?
Mr Toye: We have 25 staff. We
do not have unions involved. That is not any design on our part.
Q198 Mr Clapham: You may not have unions
involved but the very fact that we have some 7.5 million members
of trade unions at the present time means that many of the terms
and conditions and the wage rates that trade unions negotiate
actually filter down to areas where there are no negotiations
taking place.
Mr Toye: I would accept that.
I think it is quite good to have negotiation with your staff whether
that be unions or with staff representatives. That is implied
by flexibility. If I pick up one specific regulation, flexible
working, we now have four people working less than five days a
week, one of whom is a parent and the other three are not. I think
that is a very good thing and so do the staff involved.
Q199 Mr Clapham: So your flexibility
refers to a kind of structural flexibility of core and peripheral
workers where you have the core workers on maybe a 40 hour contract
but then you are able to apply flexibility through that in different
proportions.
Mr Toye: Yes.
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