Examination of Witnesses (Questions 324-339)
UNION OF
SHOP, DISTRIBUTIVE,
AND ALLIED
WORKERS
20 DECEMBER 2004
Q324 Chairman: Well good afternoon, Mr
Lillis. I believe you are in substitution for Mr Hannett today
but perhaps you could introduce yourself and your team and we
will get started.
Mr Lillis: Firstly, could I give
John's apologies. Unfortunately, he has had to go to a funeral
this morning and asked me to stand in. On my right is Graham Markall,
who is the Head of our Research Department, at our head office,
and on my left is Ruth Stoney, who is our Political Officer, again
based at our head office.
Q325 Chairman: I think you are aware
that we have been looking at the flexibility of the labour market
in UK and one of the obvious areas that we have been looking at
has been the National Minimum Wage because in some respects it
could be argued that this provides a floor for wages, and therefore
it could conceivably diminish the flexibility of the labour market.
There are other arguments of course, but this is one that has
been raised by some of the witnesses, although it has to be said
that so far I think all of the evidence has suggested that the
National Minimum Wage is yet to affect employment or for that
matter wage inflation overall, although there was a suggestion
in one piece of evidence we received to that effect. When we invited
you we were conscious that you were perhaps one of the organisations
which probably had within its membership the highest proportion
of people in the low wage bracket that were affected by the National
Minimum Wage and we wondered if, for a start, you could maybe
give us an indication of how many of your members have benefited
from the National Minimum Wage and perhaps, if appropriate, rises
over and above that which have been triggered off, or whatever
metaphor you want to use, in that area?
Mr Markall: Thank you very much.
First of all, I would say that this is probably the first year,
with the rise to £4.85 an hour from October, that our members
have felt anything like a direct impact in any wider sense of
cause and effect. In previous years, minimum wage increases have
been sufficiently modest and from a sufficiently low base not
to impact on voluntary arrangements that have obtained across
our agreements with the employers with whom we negotiate. This
year, however, I think there has been a noticeable and evident
difference in that several of the employers we deal with, notably
in the retail cooperative societies and companies like Booker
Cash & Carry, have made a very deliberate attempt to distance
themselves from the very idea and the image of being a minimum
wage employer and have bumped up their basic hourly rates even
for the lowest grades to £5 an hour, a very symbolic sum,
and put some clear water between themselves and the minimum wage
itself. I think you asked for some suggestion of numbers. We cannot
be clear about that because we do not know with any precision
how many people are within particular grades within any one employer's
payroll, but I would have thought it numbers several thousand
of our members who will have benefited from a rise to £5.
On the bottom rate of the retail cooperative societies, for example,
that would represent a percentage increase of 10% to 10.5%. That
is a significant percentage rise and a significant money sum for
people, so I think it is possible to argue that they have benefited
directly for the latest increase in the minimum wage by a figure
in excess of the minimum wage itself.
Q326 Chairman: In the retail industry
how many workers, roughly, are covered by union-negotiated agreements,
either by you or other organisations?
Mr Markall: Well, only about 10%.
Approximately 90% of retail workers are organised by no-one. We
organise the vast, vast majority of the 10% who are organised.
You would expect us to say that but it is true statistically.
There are one or two other unions who have what we would describe
as a toehold but we are known, for good reason, as the shop workers'
trade union and we have about 240,000 shop workers in membership
of the trade union.
Q327 Chairman: If 240,000 is 10% then
we are talking about nearly 2,400,000 million?
Mr Markall: Yes.
Q328 Chairman: Of the other 2.1 million,
how many of them are covered but are not members, if you know
what I mean, in the sense that you do not have 100% union coverage?
Mr Markall: Okay. The membership
we have—the 240,000—are actually sited with a handful
of very large employers. The majority of our members are
with the likes of Tesco, Sainsbury, the Co-op Societies, Morrison
Safeway, Kwik Save, Somerfield. Those are the employers where
we have our principal membership, plus some non-food employers
like Woolworth's and Argos as well, but principally our interests
and our membership is in the retail food sector and within that
in the very large multiple food retail environment.
Q329 Mr Clapham: Given the 240,000 membership,
which is about 10% of the total workforce, are any of the employers
putting up barriers to you being able to organise in their organisations?
Mr Markall: It is hard to describe
it as a barrier but they can be demanding. In other words, if
their business is to sell food, with great success, and our business
is to sell trade union membership, they expect us to do our job
and them to do theirs. I would not call it a barrier but I think
they operate with a fairly clear division of labour, although
we obviously argue strenuously that it is in their interests to
help us recruit people into the union. They rely on us speaking
with authority for "their people", as they put it, and
the best way to do that is to have them join us. It is in their
interests as well as ours. That is our view.
Q330 Chairman: I take it from what you
are saying that ASDA is not organised?
Mr Markall: Not by ourselves.
Q331 Chairman: It is organised by someone
else, is it?
Mr Markall: I think the GMB have
some membership there.
Q332 Chairman: What I was getting to
was whether or not ASDA under the Wal-Mart umbrella was behaving
like its American counterpart.
Mr Lillis: Certainly there are
indications that that is the case and that Wal-Mart is trying
to introduce an Americanism into the way they run their stores
here. There is still a vast turnover in their employees. Just
to come back to the other question on getting access; the 24/7
culture also creates problems for us because the vast majority
of the retail workers are part-time workers working 24/7. Again
we have limited resource as an organisation so that puts some
barrier up as well.
Q333 Sir Robert Smith: Just following
on with a question about the impact over and above the specific
people affected by the minimum wage. You mentioned how some employers
already this year have seen that their base will be slightly up.
Has there been any impact further up pay grades because the basic
levels have come up? Has there been any reference back?
Mr Markall: No, in fact the trend
is the reverse.
Q334 Sir Robert Smith: Flattened?
Mr Markall: More than flattened.
It has almost demolished grading structures on the shop floor.
The Co-operative Retail Societies have done that this year, Sainsbury's,
Kwik Save and Somerfield have done that already, and Tesco's are
in the process of doing it. They narrowed the differential between
the two major shop floor grades this year, at our suggestion by
the way, and are agreeing with us that they need to look further
at it next year. So they are in the process of not just smoothing
but flattening.
Q335 Sir Robert Smith: Was that something
that was going to happen anyway, regardless of the minimum wage?
Mr Markall: Yes and there is a
heavy emphasis on functional flexibility on the shop floor.
Mr Lillis: That is probably the
key. It is flexibility and reducing the grades down. They become
multi-skilled, which gives the employer a degree of flexibility
in terms of managing their stores and shops and again it assists
us in terms of pushing the lower rates of pay up.
Q336 Linda Perham: Just for a moment
going back to what we were saying earlier about your membership
being 10% of retail workers; how does that affect your ability
to engage in collective bargaining?
Mr Markall: It means that we have
to be extraordinarily resourceful and highly skilled advocates,
quite seriously. I know there was a stereotype of trade union
negotiators as brawny, table thumpers, and employers having to
roll over. In fact, what we have had to do for many, many years
is to argue from the base of reason, justice, fairness and good
business sense, which is the only way we have managed to gain
any headway in an environment in which we do not have what some
people would call conventional trade union muscle. We also have,
by design, a very broad bargaining agenda so that whilst we recognise
that handsome pay rises are exceptional and almost unheard of
in the retail environment because of employer resistance, we have
learnt for a long time now to bargain across a broader agenda
of what matters to our members (not to say that pay is not important)
which is about worker-centred flexibility, about work-life balance,
about family-friendly issues, about the kind of environment in
which people feel valued and central rather than peripheral and
disposable. Those kinds of gains are as important to our people
as, frankly, a rather modest increase in a rather modest rate.
At low rates of inflation a two or 3% increase on £5 is not
a lot of money, it is pence. So whilst it remains important it
is not going to turn people's heads and we have to think more
imaginatively and extensively about what we can do to improve
working life in those areas.
Mr Lillis: On the 10% membership
point, obviously different companies have higher degrees of membership.
In some companies we have 50-60% membership. We have entered into
quite a few partnership arrangements with employers, as Graham
has just said, handling all aspects of the employment situation
not just on pay. We are looking to assist the employer to develop
and in that sense bring that trust into the relationship. Treat
the employees fairly, treat them with a decent wage, and hopefully
it will pay dividends for you in the end.
Q337 Linda Perham: Thank you. You note
in your evidence that employment in retail actually rose following
the 2003 minimum wage increase by 86,000 in three months. Do you
accept that there might come a point where employment might suffer?
I do not know whether you have got any research that suggests
what point that would be, whether you just go for the trial and
error approach where the rate is pushed up until employment is
actually going to be affected?
Mr Markall: We do not have any.
No-one has a crystal ball on this.
Q338 Linda Perham: Not even any projections?
Mr Markall: No, I do not think
we speculate in that way. What I would say is I think we would
celebrate the way in which the Low Pay Commission has gone about
its business in that key role of hearing from all the interested
parties from all kinds of angles about what would and would not
suffice, and what would and would not be threatening in terms
of jobs and viability of businesses. Their watch word has been
caution. I think their record to date is clear to see, it has
been massively successful, it has been flawless, jobs have been
gained not lost. We place our faith in their decision-making capacity
and the mechanism itself for delivering decent but reasonable
rises in the minimum wage which have not impacted on employment.
I am not sure there is anybody, apart from people who may have
a vested interest in talking down the minimum wage, that could
reliably point to a theoretical scenario in which jobs might be
lost, bearing in mind people do come to the Low Pay Commission
and to this Committee, I am sure, talking about the potential
job-destroying effects of the minimum wage, but they would say
that wouldn't they. Labour costs are a significant element of
business costs particularly in the retail sector, and arenas like
the Low Pay Commission are one of the few who can hope to obtain
any kind of purchase on their costs in the future. They cannot
haggle with the competition. They cannot affect interest rates
but they can at least hope to try to impact on rises in the minimum
wage and contain their own costs in that way. I do not blame them
for doing that but I think their speculation needs to be treated
with some caution here.
Q339 Linda Perham: You say the way they
have dealt with things up to now has been flawless but you do
not think the minimum wage is at the right level, though, you
think it could be higher, do you not?
Mr Markall: Yes.
Mr Lillis: Absolutely higher.
As an organisation it is certainly in not in our interests to
be asking for a ridiculously high rate for the National Minimum
Wage. We do not want to be in a position where we are threatening
jobs, but all the evidence, as you have just mentioned, points
to increasing the number of jobs. The retail industry in this
country is still continuing to expand and still has for 2005-06
quite an ambitious expansion plan for most of the top retail companies,
so they are still making huge profits. Our members and employees
within the industry are still extremely low paid in comparison
with most people. As Graham just pointed out, to reach a £5
minimum wage rate with the Co-op and one or two other employers
has been quite significant for us but, keep it in perspective,
it is still a low wage for the 21st century.
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