Examination of Witnesses (Questions 340-359)
UNION OF
SHOP, DISTRIBUTIVE,
AND ALLIED
WORKERS
20 DECEMBER 2004
Q340 Chairman: You say that the industry
is expanding. The experience of a lot of us is that the supermarket
comes to town and the wee shops close because people find it more
convenient, easier to park, they can do all their shopping under
one roof—the one payment covers everything sort of approach.
By definition, your members are recruited and organised in the
big employers, so you associate retailing with the large units.
The public sometimes associate them with the smaller units. They
do not always necessarily associate them with many feelings of
loyalty, one has to say, nevertheless we get complaints that it
is the National Minimum Wage or it is the supermarket that is
killing off the town centre because the wee shops are closing
and that in fact all you are getting is a substitution effect
with labour going from the small shop keepers to the supermarkets.
Would that be a reasonable criticism to make of the expansion
of retailing in the UK?
Mr Lillis: If you look at it,
the vast majority of the large retailers have taken over most
of the smaller retailers that tend to have stores of what we would
see as the convenience/corner store type shops. Yes, four or five
big players are basically swallowing everything up so in that
sense you are right, but then again when people go to shop the
big employers have got the bargaining power in terms of the supply
chain and buying in cheap and at the end of the day people going
to the Tescos, the Sainsburys, the Somerfields, the Quicksaves
and the Safeways of the world and competition is what is putting
the smaller ones out of business.
Mr Markall: We have always called
for a balanced policy around planning and planning guidance on
retail development. We have put in submissions to the Department
for the Environment on that front over the years as well. We are
simply calling for all retailers of all shapes and sizes to be
able to compete effectively. Do not forget that many of our members,
quite apart from where they work, which as you correctly say is
in large retail units, actually shop locally and rely on small
retail outlets. They are consumers as well as producers and they
have no interest in seeing suburban high streets go to the wall,
either as consumers or ratepayers because that has a knock-on
effect for the local authority and its infrastructure. We have
always called for a balanced approach to shopping policy and strategy
and not unduly to favour the large retail employer. In fact, some
of our most recent campaigns, including one that Ruth has been
involved in, are around violence at work and trying to strip that
sense of fear and intimidation away from local shopping centres
through more proactive involvement from local authorities and
other authorities to give viability and vitality to smaller environments.
Q341 Sir Robert Smith: One point on the
employment side of retail is how much of it has grown on the back
of the credit boom? If the Bank of England is keen to rein that
in and if the attempt is to reduce the burden of debt that people
are taking on, will that turn that employment rise into a dip?
Mr Markall: I do not know the
answer to that, to be perfectly honest with you. All I would say
is that the kind of employers we are mostly involved with are
the retail food employers and food expenditure is not particularly
credit based.
Q342 Mr Berry: USDAW opposes a lower
minimum wage for 18 to 21 year olds, as indeed do many others.
What effect do you think there would be in the sectors where you
are organised of having a uniform National Minimum Wage from age
18 upwards? What difference would it make?
Ms Stoney: At the moment in the
companies that we organise, practically every single one of them
has the adult rates paid from 18, as has always been the case.
What we are very concerned about is what has been happening since
the introduction of the 18 to 21 year old rate in some very large
companies within the service sector—and we particularly
looked at the fast food outlets such as McDonald's, Burger King
and KFC and in retail the firms such as Dixons and Currys and
the Labour Force Survey also found that quite a few of the pub
retailers have brought in 18 to 21 year old rates simply because
they can and these companies employ significant numbers of young
people—which is they have started to pay them a low wage
rate in order to offset the costs of the rise in the adult rate
in the minimum wage. This is actually having quite a serious detrimental
effect on the young people. A lot of them are in full-time education
and trying to work their way through their education and the less
they are paid the longer hours they have to work and the more
of an impact it has on their studies, so that is one of the problems
but also once you start introducing pay scales according to age
you are saying to people, "We are employing you because you
are young." It is in low skilled and unskilled work and there
is no incentive on the employer to train or on the employee to
be trained if they simply get a pay rise when they reach the age
of 22 rather than because they have improved their skills and
performance at work.
Q343 Mr Berry: You do support, as I understand
it, 16 and 17 year olds being on a minimum wage that is less than
the national minimum wage. You welcome the extension of the principle
to 16 to 17 year olds. You perfectly reasonably said £3 is
too low and I think you have argued for 80% of the National Minimum
Wage. Why would you not make the same argument for 16 and 17 year
olds as you would make for those who are 18 to 21?
Ms Stoney: In general, we accept
the Government's argument and that of many people that ideally
16 and 17 year olds should be in full-time education or training.
What we do try and do is base our recommendations to the Low Pay
Commission very much on what we can bargain for in the service
sector in low paid, low skilled industries; and in the private
sector, and in most companies where we organise we do have a 16
and 17 year old youth rate because those people are not as productive
as a 18 year old who can take on more responsibility particularly
around sales of alcohol and the sort of responsibility where you
have to be 18. We believe that the £3 an hour rate is far
too low and we would like to see that increased to be 80% of the
adult rate of the minimum wage, which of course should be paid
at 18, but we do not feel that it is justified to argue completely
for the full adult rate at 16 in most circumstances.
Q344 Mr Berry: You have mentioned that
it may well be desirable that 16 and 17 year olds should be in
education or training. Do you think a higher wage for 16 and 17
years olds or indeed 18 to 21 year olds, would deter young people
from continuing in education? One argument against the National
Minimum Wage has always been that if you increase the price of
labour people lose their jobs. We have discussed that one and
we have all got our own conclusions on that, no doubt. The other
argument has been that for young people in particular what happens
is that because you are paying them a little bit more this will
deter them from continuing in full-time education or training.
Do you think that argument holds any validity?
Ms Stoney: I think the fact of
the matter is that it has not. Whilst we are up to about 16% of
18 to 21 years who are now being paid some sort of youth rate
that is less than the adult rate of the minimum rate, you have
still got 85% of them being paid over and above the full adult
rate of the minimum wage, and in the last few years, as you know,
we have seen massive increases in the number of 18 to 20 year
olds who are staying on in full-time education. Basically the
facts of the matter do not bear it out. Young people know there
is a direct correlation between the skills that they have got
and the wages that they can command at the end of that.
Mr Berry: Thank you very much.
Q345 Chairman: Do you think there is
a case for a starter rate in the sense that young people could
be leaving school at 18 and they are no better or worse than the
youngsters of 16 in terms of their experience? I can appreciate
you see this almost exclusively through the retailing prism and
in the context of the supermarket and the flexibility of not being
able to sell let's say liquor might well be a drawback and it
may be it can be interpreted as just a movement of cases of drink
about the place, or something like that. We will leave that aside,
but is there a case that says, well, we are taking on green labour,
should their starting rate be based on time rather than age, six
months or something like that?
Mr Lillis: The vast majority of
the agreements that we deal with have that already in them regardless
of what age you come in. They will have a three-month, six-month
or nine-month probationary period until you are upskilled. So
that is already there and recognised within the industry. While
you are saying you would put in for the minimum wage for the younger
ones at the minimum rate of pay within the minimum wage is still
extremely low. Most of the employers that we are dealing with
are paying above the minimum wage for their starter rate and after
six months they are getting about 30% more than what the initial
rate of pay is.
Ms Stoney: There is a development
rate at the moment for six months but that is very little used
because so few employers, certainly in our sectors, bring in the
level of training and qualifications that people would need to
have to qualify to go on that development rate. If some sort of
starter rate came in, be it for young people or older ones as
well, we would very much like to see it being linked to skills
and training because, unfortunately, there is far too little of
that that goes on.
Q346 Mr Clapham: Do you have any links
with some of the bigger companies with regards to the training
and education of younger people coming into retailing?
Mr Markall: If you mean vocational
training in the conventional sense we have some involvement (and
it is not my sphere) with the skills councils and with the designers
of the syllabus and so on. We have always had that for many years.
I think where we have more contemporary experience, if you like,
is around the whole lifelong learning question. That is not restricted
to young workers nor necessarily workers who have been particularly
unskilled, although the core element of the lifelong learning
agenda is around basic skills and core skills. So it is the lifelong
learning agenda that has actually taken off amongst our membership
rather than a conventional vocational training agenda.
Q347 Mr Clapham: So you have had a good
response from your membership. What about the employers?
Mr Markall: To be fair, there
are a number of employers who have seized upon that opportunity
themselves, not so many in retail to date but retail is the target
industry for us next year. We have cut our teeth in areas of distribution
and food manufacture, where we also have a base, which has a much
more conventionally organised format, so there is an agenda out
there around learning and skills but it is possibly not the conventional
one in terms of vocational training and qualifications and so
on.
Mr Lillis: It is fair to say that
the retailers have taken to it as well and we have run a few pilots
this year within the lifelong learning agenda and it has been
a huge success, so we are looking to see that increase for 2005-06.
Also most of our lifelong learning has taken place in the distribution,
warehousing and factory environments where it is easier to organise
as opposed to retail, so there is a lot of work going on there
between ourselves and the employers in a joint effort to have
a system of upskilling people.
Q348 Chairman: Could I ask you if you
have this information, you may not have it, but do you have any
figures, or could you get some, for the people who have been in
this category that seem to be not being recruited, the KFC/Currys/Dixons/McDonald's
grouping, the people who are not being employed 21-plus and being
taken on at the lower rate?
Mr Lillis: I am sure we can get
something for you.
Ms Stoney: We have got figures
generally on 18 to 21 year olds and the proportions of those who
are on youth rates. For those companies, because we do not organise
for them, then obviously they are not going to give us their employment
figures, I am afraid, so we could not get those.
Chairman: Okay, but I will tell you what
you could do, if you could just identify in a letter all of the
companies whom you suspect are employing people at the youth rate
in preference to the adult rate because obviously if this is a
shift in recruitment it might be possible for us to write to them
and ask them if there is a change in recruitment as a consequence
of the change in the National Minimum Wage and, if that the case,
how many people have been affected by their step change in recruitment
policy, if as you say it is the case. As I say, we have no reason
to disbelieve you but without any evidence all we have are your
assertions and we need to get a bit more. I understand why you
cannot give us that because you are not in a position to quantify
it but we will try and get some numbers by way of letter. It might
cause their HR directors some problems over Christmas but we will
worry about that later!
Q349 Richard Burden: I would also like
to ask you a bit about areas where you are probably going to have
difficulty quantifying things in the answer. I do understand that
the biggest concentration of trade unionism is in the larger chains
and that is where the vast bulk of your membership is, but in
terms of either the small single shops, the chains of independents,
the smaller chains, and so on, do you have any sense beyond the
issue of the youth rate about what impact the National Minimum
Wage has been having in that kind of sector, the convenience food
sector?
Mr Markall: We do not have original
data of our own. It is not the sort of enterprise we would engage
in to see what is going on in areas where our members, by and
large, do not work and which we are not primarily interested in,
but what we do do is keep a watchful eye on the DTI's Small Business
Unit to see what is happening to small businesses there and on
their Insolvency Service to see what is happening with business
failure and see if that throws any light on the claim that small
and medium-sized businesses are suffering, perhaps terminally,
from the impact of the National Minimum Wage. It makes quite interesting
reading. 70% of small businesses do not employ anyone so when
you hear the small business voice go up you need to bear in mind
that they are speaking in terms of the employment effects for
a 30% minority of the small business lobby for a start. That is
the first point. Secondly, if you look at the figures from the
DTI's Insolvency Service about what is going on with company failure
at the moment, you will see that the most current quarter's figures
are lower than the one before, this year's figures are lower than
the equivalent period last year and all the most recent years'
figures are lower than anything in the years leading up to the
introduction of the minimum wage before it even impacted. Clearly
it can be contested what the causal factors are there, but I think
it is very difficult to maintain that the minimum wage is damaging
business to the extent of creating business failure when you look
at data like that. Indeed, from time to time the Insolvency Service
runs surveys of failed businesses to get their account of what
on earth went wrong and you have to look very hard (in fact it
is impossible) to find the minimum wage cited as a reason for
their business failure. They cite bad debts, they cite tax liabilities,
they cite rents, they cite business rates, and most important
of all they cite the competition. So the biggest threat to small
and medium-sized retail businesses is large retail businesses,
not the National Minimum Wage.
Q350 Richard Burden: Okay, so in terms
of business failure you do not see any evidence of a correlation?
Mr Markall: No.
Q351 Richard Burden: What about in terms
of employment levels amongst the 30% of smaller businesses that
do employ others? Have you seen any citing of evidence there?
Mr Markall: Again in the survey
that the DTI commissioned only last year into small businesses
on a range of fronts, including their employment profile and practices,
when they asked small businesses who employed no-one why they
employed no-one, to be fair they had some vague notion about red
tape but they could not specify what they meant and when the minimum
wage and Working Time Regulations were prompted to them only 3%
of people who employed no-one said that was the reason why they
employed no-one, so it does not seem to be a major disincentive
to employment.
Q352 Richard Burden: Can we come on to
the other side of that equation, that is the question of compliance
in areas that you do not organise in. Have you got any sense of
how far non-compliance may be an issue, particularly amongst smaller
retail outlets?
Mr Markall: I think Ruth has something
to say about that.
Ms Stoney: Obviously, as Graham
says, we cannot monitor what is going on in companies where we
do not organise and we do not have a foothold. It is very important
that the minimum wage is properly enforced. Where we do encounter
problems with compliance with the minimum wage it tends to be
around not the retail sector but the non-retail, larger workplaces
where agency workers are used, either where there are UK workers
or more especially where there are migrant workers having unlawful
deductions from their wages or not being given proper holiday
pay and entitlement, and those are the problems that we encounter
with compliance with the minimum wage.
Q353 Richard Burden: That is an area
in which you organise?
Ms Stoney: There will often be
a proportion of agency workers on sites where we have got a union
agreement and Paddy in the field has done a lot of work on bringing
those people into organisation.
Mr Lillis: We have been fairly
successful in the last 12 to 18 months with getting union agreements
with agencies, not necessarily because they wanted to have agreements
with us but because they were pushed into it on the basis of the
bad publicity around them. An instance would be a big food manufacturing
company in South Wales and the South West of England who was recruiting
migrant workers from Portugal and Spain through an agency. In
fact they were paying them about £2.10 an hour after
they had deducted their accommodation where they had six to 10
people living in one house (of course with the sanitary problems
and everything else that goes with it) and had deducted their
fares. So it was quite an exploitative practice and we said to
the employer whom we had an agreement with that bringing in agency
people is not acceptable, which resulted in getting meetings with
the agency themselves and being able to arrive at an agreement
which protected those agency workers but also protected our members,
the core employees, so that it would not undermine the agreed
rates in the particular factories we are talking about. We can
do good by getting involved with some of these agencies and getting
an agreement in place, which not only protects the agency workers
and migrant workers but also protects our own workers in this
country and ensures that they are not having their wages undermined.
Q354 Richard Burden: Have you seen or
sensed an increase in the employment of migrant or agency workers?
Mr Lillis: Certainly on the food
manufacturing side there is a high percentage of agency workers
who are migrant workers and in the lower skilled areas as well,
which we keep a close watch on, especially in the areas where
we have got agreements because it can, as I said, undermine our
collective agreements if they are paying a lower rate of pay,
and that is not in anybody's interests.
Q355 Richard Burden: The way that you
tackled that was to use the route you already had, in other words
a recognition agreement with the company to get through to the
agency. Getting back to the issue of smaller shops and retailers,
is there anything you think could be done to, first of all, generate
more information about the extent of compliance, and perhaps actually
generate higher rates of compliance? Do you have any contacts
with, say, chains like Spar or trade associations like the Association
of Convenience Stores? Do you have a dialogue with them?
Mr Lillis: Your department writes
to them from time to time.
Mr Markall: Ruth, do you want
to talk about that?
Ms Stoney: We do tend to have
dialogue with associations like the Association of Convenience
Stores, and through them we will look at policies on the minimum
wage. I think there is quite a high level of awareness about the
level of the minimum wage which is very helpful. Obviously there
is more that can be done to bring that message home to people
who work for small employers. Often there are not very many of
them and there is very little trade organisation or back-up anywhere
in the sector to support them if they are looking to increase
their wages and they feel they have got a problem, but generally
it is not something that we would work on.
Q356 Richard Burden: Is there anything
extra that you feel needs to be done by government or anyone else
to either increase knowledge or awareness or to improve mechanisms
for ensuring compliance?
Ms Stoney: I think that ensuring
compliance and ensuring that employers keep proper records would
be extremely helpful all the way through, both on things like
the minimum wage but also when it comes to keeping benefits in
place, that sort of thing.
Chairman: Judy Mallaber?
Q357 Judy Mallaber: My apologies for
being late and missing the earlier part of evidence. I will pick
it up in the transcript. It is snowing in Derbyshire! You seem
to be suggesting in your evidence, although I am not altogether
clear, that maybe the National Minimum Wage should be tied to
median male earnings. Is that an actual recommendation you are
making and, if so, could you explain why that would be?
Mr Markall: The question arises
almost commonsensically when we talk to the Low Pay Commission
or in general; "what do you think the minimum wage should
be?" rather than just higher, and we cited the median not
as a prescription but as a reference point and we located the
reference point in the old Wages Council orders. The Wages Council
system governed pay and conditions in what used to be called the
`sweating trades' for decades until they were largely abolished
in the mid 1980s and entirely abolished a few years later in the
early 1990s. They used to provide for certain basic rates of pay,
among other things. They tended to be pitched at around the proportion
of the median that we recommended in our submission to the Low
Pay Commission, so all we were trying to do was actually repair
some of the damage that was done to people with the abolition
of the Wages Council and use the Wages Council type of rate as
a reference point. Bearing in mind that the unions are often accused
of thinking of a number and doubling it and making it up as we
go along, we actually tried to anchor ourselves in what had been
the basic levels of protection some years ago and refresh them,
and that gave us a figure in the range that we cited to the Low
Pay Commission, which is not to say we dispute the role of the
Low Pay Commission and that forum in recommending a minimum wage.
We absolutely champion the Low Pay Commission but we have to start
somewhere when it comes to talking to them about what we think
is fair and reasonable.
Q358 Judy Mallaber: You say it is a reference
point not a prescription, but I recall the arguments when it was
argued that the minimum wage be set at two-thirds of average earnings
and the illogicality of that because it just raised the average
earnings level.
Mr Markall: No, it would not.
It was a median average not a mean average.
Q359 Judy Mallaber: We could go back
over history and it is quite a long time ago, but on the argument
about using the median, are you saying that is something that
although you would presumably say the Low Pay Commission should
still have discretion, that you would like them to take that as
a specific formula that they should look at?
Mr Markall: Yes, I think it is
worth putting into the pot, but I would be wary of doing anything
that smacks of prescription or of in any sense downgrading or
devaluing the role of the Low Pay Commission and that kind of
mechanism. I think for those of us who campaigned in advance of
the 1997 General Election, at a time when we were talking about
a formulaic approach there was a great period of enlightenment
when the idea of a government that was acting like "Big Brother"
and waving a stick and telling employers by prescription what
it should do was not a terribly clever thing to do and the mechanism
that the Low Pay Commission offers, which is a tripartite mechanism
with employers and representatives having the opportunity to make
a case and have a hearing but then most importantly take ownership
of the outcome, is absolutely crucial, and I think when we talk
about median levels at the moment it is simply as a reference
point trying to guide the debate.
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