Examination of Witnesses (Questions 220
- 239)
TUESDAY 6 FEBRUARY 2007
MR PETER
KELLY AND
MS CAROL
YOUNG
Q220 Mr McGovern:
Thank you very much. I do not think you fudged that question at
all. Carol, do you have view on whether there should be priorities
and, if so, what they should be?
Ms Young: Yes. I think Peter has
put it really well. We have argued this a number of times—the
fact that the working age adults of today are the parents of tomorrow.
Professor Sinfield and Professor Veit-Wilson both said if you
want to tackle poverty in the future look at the children. But
if you want to make a difference today, you need to look at adults
who do not have children as well.
Q221 Mr Davidson:
In terms of looking at the adults, I chair Greater Pollock Working,
which is about getting people into jobs in Silverburn and all
the big developments there. The argument we have in favour of
people taking low paid jobs is to stay on at school: "If
you have training opportunities and you pursue so-and-so, you
will then move out of that." To what extent is that your
experience in dealing with people on low pay? For what percentage
of them do you think that is a realistic aspiration?
Ms Young: This is a huge issue
and it ties in with a lot of our priority issues around low pay.
First of all, we take a slightly different approach to this issue
from most organisations. From our point of view, the problem with
low paid employment is that the jobs that are out there are low
quality. It is not that they are low skilled. If you look at the
main, low paying jobs, you are looking at the five "C"s:
customer service, cleaning, caring, clerical and catering. If
you are looking at people in these jobs, we would disagree that
these are not good jobs. It does take skill to do this kind of
work. People are not bothering with how to do it and we believe
there is a problem with the value that is placed on these jobs.
From that point of view, there are a lot of people who will be
in these jobs who are not satisfied with them, believe it is not
for them and want to up-skill. There is a new up-skilling agenda
around getting people out of low pay. While we do believe that
people should have the opportunity to follow this path if they
want to, to gain better skills and look for a different kind of
job, we also think that people should be respected to have the
jobs they are already in. If someone wants to go through a life
of working as a security guard or a cleaner, they should not be
penalised for doing so. What is more, I would also add that it
is probably unrealistic to think that everyone can move up to
what you would call a better job, because the simple fact is that
these are jobs that we need. We need people to clean for us and
we need people to care for our children and our parents. From
our point of view, yes, we can see the point that is being made
with people moving up into better jobs but we do not believe that
should be the primary way of tackling low pay.
Q222 Mr Davidson:
That is very much an argument then for having a much more substantial
minimum wage than even the £5.72 that you are arguing.
Ms Young: Absolutely.
Q223 Mr Davidson:
Yet £5.72 is what you are arguing.
Ms Young: For an immediate up
rating, yes. The tack we tend to take with the national minimum
wage is that we have seen submissions to the Low Pay Commission
in the past where people have asked for immediate rises of very
high amounts and it never happens. Incidentally, I think the figure
has now gone up to £5.92 since that report was written for
you. We do not suggest that this is a living wage but this would
be a rate that we genuinely believe is economically viable and
that the Low Pay Commission could find suitable for uprating within
the coming year.
Q224 Ms Clark:
I am very grateful to you for updating us on your current view
in terms of what the immediate increase should be. In his evidence
to us recently, Professor Sinfield drew attention to the levels
of income for many people in work despite the minimum wage. During
our evidence session in Inverness, it was put to us that a reasonable
minimum wage would be in the region of £7 per hour and Professor
Sinfield refused to be drawn on that figure. What is your view
of that kind of figure as a national minimum wage?
Ms Young: I can understand where
Professor Sinfield is coming from. We do share a lot of the hopes
for the future that professor has put across to you, that we can
have more work done for minimum incomes standards. It would be
great to have a figure that is officially agreed by everyone to
be the ideal for participation in society, but, where we do not
have that, we at the moment use a threshold of two-thirds of male
median earnings to describe people who are on low pay and at the
moment that stands at £7.89 per annum, going up every year
along with the Annual Survey of Hours and Earnings. It is broadly
in line with what you were hearing at your evidence session in
the Highlands.
Q225 Ms Clark:
Your organisation will recall that before the national minimum
wage was introduced, many argued that introducing a national minimum
wage was going to lead to huge increases in unemployment, particularly
in some of the areas in the country where wages were already very,
very low. Do you think that if there was to be a significant increase
in the national minimum wage, for example to the £5.92 level
you have mentioned or, indeed, to the £7.89 figure which
is the other figure you have mentioned, do you think there would
be a danger that there would be an increase in unemployment? Do
you think some employers might decide to employ fewer people because
of the increase of their salary costs?
Ms Young: If you are talking about
the minimum wage target level that we propose, we would not foresee
any adverse economic consequences from that. So far, there have
not been these kinds of consequences. In fact, in a lot of the
low pay sectors employment has gone up as the minimum wage has
risen, so we would not be too worried about that. However, we
can understand small business owners who are worried about their
margins when there is a very large increase. I think if it was
to go up speedily to the level of, say, £7.89 per hour, there
may be some need for government intervention. It kind of ties
into a position on tax credits. Our position is that we would
like to see a much higher minimum wage, with tax credits gradually
being replaced with a system of support for small employers who
find it difficult to pay a decent minimum wage, because obviously
we do not want to see business owners or the economy in general
suffer but we do believe there has to be a better way of doing
it than we have at the moment.
Q226 Ms Clark:
Have you given consideration to how quickly you would like to
see these increases taking place? If you want an immediate increase
to something in the region of £5.92, how quickly do you envisage
it would be possible to get to something like £7.89?
Ms Young: I think it is difficult
to say. This is one of these areas where the different stakeholders
involved in this really have to work together in a way that is
open minded and not protectionist. I think we all have our own
agendas but it is has to be good for everyone if we can raise
society to a level where we do not have this problem with poverty.
It is not a pleasant thing to have in a developed economy. If
we can get all stakeholders together round the table—and
that is the job of the Low Pay Commission and no doubt they are
trying to do that already—I am sure it could be possible
if all the issues were put on the table to find a way to raise
it as quickly as possible.
Q227 Danny Alexander:
Did I hear you right: did you say you wanted to abolish tax credits?
Ms Young: Not abolish. Certainly
at the moment tax credits are providing a totally vital lifeline
to people on low incomes. However, for people in work—not
out of work obviously: tax credits will still be an important
factor there (for example, child tax credit)—we would like
to see the vast bulk of their income coming from their wages.
If that means taking some money from the tax credit system and
putting it into supporting small employers, then that is route
we would like to see people take.
Q228 Danny Alexander:
Coming back on that point: when you look at Lisa Harker's review
of child poverty for the DWP,[21]
one of the things she drew out in that report was that one of
the biggest groups of families with children in poverty which
had not really been addressed was families with one or more adults
in work and the children still living in poverty. I wonder what
research you have done on the extent to which lifting the minimum
wage to any particular level. Let us take the £5.92 level
that you have just described as being your initial target, as
it were. If we were to lift the minimum wage to £5.92, how
many of the families where there is at least one adult in work
in poverty would be lifted out of poverty? I have heard others
questioning, if you are looking at the child poverty target in
particular, the efficacy of raising the minimum wage as being
the best way to raise the incomes of those families, because you
might have either one person in a part-time job which could be
paying substantially more than the minimum wage but because they
are only in part-time work they are not earning a great deal of
money, or minimum wage jobs, sometimes at any rate, might, in
that group of families, be jobs that a second earner is in rather
than the first earner. To what extent do you think that raising
the minimum wage to that level would have an impact on that group
of people?
Ms Young: Without more work being
done on minimum income standards, it is quite difficult to judge
exactly what impact that rise would have. Raising the national
minimum wage is certainly one method of improving incomes for
people in those brackets but, from our point of view, this is
also tied in with an agenda about fairness and work practice,
so, whilst there may be some people who could argue quite well
that some kind of benefit mechanism would be a better way to raise
these incomes, from our point of view that would not tackle the
core problem that is causing in-work poverty, which is a lack
of adequately paid and sustainable work.
Mr Kelly: Just to add to what
Carol said, I think the issue about fairness at work, about minimum
wage providing fairness for work, is a starting point but I do
remember some research—again probably carried out by Joseph
Rowntree—in 2004 or 2005 looking at the incentive effects
of minimum wages and it is mixed for different groups. Taking
the combination since tax credits were introduced, the family
types who were doing better were lone parents. There was more
of an incentive to stay in work or to take on more work. For those
couple families which you mentioned, which I think is a big, big
challenge in reaching the child poverty targets, the incentive
effects of something like an increase in the minimum wage is maybe
not as strong. Just on issues around levels of minimum wage and
so on, there is real interest in the experience in London from
the London Citizens Organisation who have been campaigning for
years—you might know them as TELCO previously. They now
have an agreement with the GLA, I think, for a minimum wage or
a living wage of £7.05 or something like that. I think that
is an interesting approach. It depends what we think a minimum
wage is going to do. Is a minimum wage ever going to be a living
wage? Can we legislate for that? I do not have a fixed view on
this, but can we legislate for a living wage or do we need to
take an approach that focuses more on the responsibility of employers
to provide a living wage themselves?
Q229 Mr Wallace:
Could I ask about some of the alternatives. You talk about a minimum
wage; have you examined the alternatives of a higher tax threshold?
Even on your £272 there is about £900 of tax taken off
that, plus £300 of NI too. An alternative is raising the
level when you start paying tax. Have you examined that as part
of the Low Pay Unit?
Ms Young: It is not something
we have done any great amount of official work on but we are broadly
in favour of a progressive taxation system which would be more
redistributive than it is at present. Certainly we hear quite
frequently that it seems people on the lowest incomes are paying
a higher proportion out in tax then they need to be compared to
people on higher incomes, so certainly it is something we would
like to see looked at but it is not an area of particular expertise.
Q230 Mr Wallace:
The point is it is an alternative. If I lifted the tax ratio threshold
to £10,000 threshold, that would be about 47 pence extra
per hour for a 34 hour week. It is not both but either/or. Is
the per hour minimum wage a better system, in your view, than
allowing people on low incomes to take home more, than a tax threshold
rise?
Ms Young: As I say, it is not
something I have done work on but off the top of my head I would
say I would still be broadly more in favour of the minimum wage
route for the simple fact that, first of all, I do not see so
much of a need to be removing that money from the Treasury if
we can avoid doing so and, secondly, from the point of view of
we are still not valuing the jobs, we are still not looking at
what the employer is paying out to the individual as opposed to
what is paid out to the individual plus National Insurance plus
taxation. Also if we talk about the National Insurance issue there
could be a problem there if you were to raise an issue with that.
We already have a lot of problems with our clients not being entitled
to statutory sick pay, problems with pensions, problems with maternity
pay, et cetera, caused by not being entitled to these things because
of the National Insurance threshold so that would obviously have
to be factored in as well if there were to be any change in the
current system.
Q231 Mr Walker:
One of my concerns is that employers are using immigration to
depress wages and one of the ways wages increase is when there
is a scarcity of labour. Just at the time there was a scarcity
of labour in the five areas you suggested, there was a far higher
rate of immigration to fill these so-called unskilled groups (and
I agree with you I think they are skilled groups but they are
termed unskilled jobs) so just as employers were on the cusp and
the threshold of having to pay more money to fill these jobs,
all of a sudden they were let off the hook by having people coming
in from Eastern Europe who were much more willing to take on these
jobs at existing rates and therefore completely removing the need
for employers to start paying a real wage. It is certainly a concern
where I come from. I am not from Scotland, as you can probably
tell by the accent, I am from the south-east of England, but I
think it is a genuine concern where I am. I was wondering if you
regard that as something of concern where you are. Without judging
in any way those people coming from Eastern Europe to take these
jobs, I think employers are benefiting from this immigration to
the disadvantage of the low paid.
Ms Young: The issue of migrant
workers is definitely one that we are interested in. From our
point of view, it seems to us that it is not so much the quantity
of migrant work that is coming in but the spread of it. It seems
to be that in some areas it is affecting the wage market more
than others. Our primary interest in the migrant worker issue
is the actual exploitation that seems to be going along with that.
From our point of view, perhaps it is not that employers are employing
migrant workers because they will accept the minimum wage and
locals will not; it is that they are employing migrant workers
because they think they can get away with paying them less than
the minimum wage in a lot of cases and there are various sophisticated
ways in which they seem to be going about doing this. We also
have a lot of problems with overcrowding and the facilities that
they are given to live in, et cetera. We are really concerned
about employment rights in general for migrant workers.
Q232 Mr Walker:
And one of those sophisticated ways is to charge for accommodation
for example, is it not?
Ms Young: Absolutely. We did not
argue against the accommodation offset when there was the recent
consultation because we do believe that it is has the potential
to be a useful tool. However, it seems to be that there are abuses
going on where it is perhaps not the accommodation offset itself
that is causing the problem but a lack of understanding of how
that works. For example, employees are being told that they will
have money taken off their wages for utilities and it seems that
that is not allowed to be part of the accommodation offset, after
a lengthy discussion process. We are also talking about deductions
for things like transport which if it is taking you below the
national minimum wage is, frankly, illegal but there seems to
be a lack of willingness to accept that from some employers.
Q233 Mr Walker:
I think from what you are saying if employers are willing to go
to these levels to increase their profit margins they are more
than willing to just regard migrant labour as a tool for depressing
wages in the main, to be perfectly honest. These are things they
would try and get away with and probably could not get away with
with domestic workers but they are trying their luck with overseas
workers who perhaps are less sophisticated or do not have access
to the same support networks that Scottish-based workers who speak
the language would do.
Ms Young: It seems likely that
in some situations that is the case, yes.
Q234 Danny Alexander:
In the Low Pay Unit submission you draw attention to "hidden
costs", such as travel, for example, falling on people in
work.[22]
I would say that is a particular issue in rural areas like the
one I represent in the Highlands where transport costs can be
really quite substantial—if you get a job; if you do not
get a job obviously those costs are not falling on you so much.
Have you gathered any evidence on that, in particular that some
people who are in employment are facing higher costs than other
groups such as for example the unemployed or even retired people
and so are therefore worse off in work than those other groups
because of the extra costs of employment?
Ms Young: It is not something
that we have gathered evidence formally on. It is largely anecdotal
where basically we hear the woes of our clients when they phone
up. Although it is mainly to do with employment rights we quite
often hear all the ways in which their employment situation is
affecting their lives. I am not positive about this but it might
be worth asking Citizens Advice Scotland if they have collected
any evidence on this type of thing because it is the type of thing
that they quite often collect evidence on.
Q235 Mr Walker:
One thing that is way out of left field and you might not want
to answer it and I am probably being ridiculous for asking it
is we are talking about travel at the moment and I have to say
road pricing to me would be one of the most regressive things
you could do to the low paid. People who have to get to work and
kick off at 8.00 or 8.30 or 9.00 or 9.30 who have no choice, because
public transport is not there, but to use the road. We are talking
about lumbering them with charges of a pound a mile. I am not
having a go politically but these figures have been used, £1.20
on the M25 for example, which is admittedly not in Scotland. That
would be a concern to you, would it not, as to the impact this
would have on people who are already earning very little money?
Ms Young: I think this ties up
nicely with one of our primary concerns that I would like to put
across to you which is about poverty proofing. I think Professor
Sinfield has already mentioned that. It seems to be that an awful
lot of the time policies are going through without any genuine
regard for how they are going to impact on people who are on low
incomes and I think that is a classic example of where in policies
like this that are being brought forward that impact has to be
examined.
Mr Davidson: It would also be fair however
to point out, Chairman, that where we are having road pricing
in rural areas where it is revenue neutral overall and was leading
to the abolition, say, of road tax or substantial reductions in
petrol prices, it would be very much to the advantage of those
who were poorer in areas like the Highlands and the Borders because
there would not be a congestion charge added to it specifically
to deter use. In fact, for those in poorer areas it would actually
be advantageous to have a system of road pricing rather than the
existing flat rate system of high fuel taxes and road tax.
Mr Walker: I would have thought any form
of road pricing in rural areas would be totally ridiculous since
road pricing relates to areas of high road use which is largely
urban areas.
Chairman: Can I ask the Members to direct
their questions to the witnesses.
Danny Alexander: Then let me direct the
next question—
Mr Davidson: Yes or no?
Chairman: There are other places to do
party politics.
Mr Walker: We are not doing party politics;
we are having a lively debate.
Danny Alexander: On the question of extra
hidden costs falling on people who work, in rural areas where
there is no public transport available or poor transport available
and there are no buses or trains at reliable times for example
and you are having to drive (as you would if you were going from
Aviemore to Inverness) a round trip of 60 miles every day, then
the fact that petrol prices are higher in rural areas, the fact
that you have got further to go and petrol tax is so high surely
does have a big impact on whether you are even able to accept
a job let alone whether you are better off in work. A system of
road pricing that led to a very small price refund on less used
roads where there were no problems with congestion would, as Mr
Davidson quite rightly pointed out, actually have a beneficial
impact on people in these sorts of circumstances on their ability
to accept work. Do you agree with that?
Mr McGovern: Is that a question?
Mr Walker: You are taking them down a
road they do not want to go down.
Chairman: Can I please—
Danny Alexander: I would like an answer
to that question.
Chairman: Let Ben speak first.
Mr Wallace: I was just going to say I
think the point has been clearly made about the policy and about
poverty proofing that as it goes through a department of the Scottish
Executive or Whitehall, then whether it is road pricing or anything
else there needs to be a recognition of the impact. We could sit
here and argue about whether a bus on the Aviemore road is going
to make a difference or not as opposed to the poverty proofing
impact and I think that is probably the right phraseology that
we are at.
Q236 Mr Davidson:
Could I follow up, Chairman, not on that point but on a point
that you made about basically subsidising low paying employers.
I do genuinely find that quite surprising given the point that
was made about there being labour shortages and so on. I would
have thought that one of the best ways of allowing wage rates
to rise would be by a process of competition and businesses that
cannot afford to pay anything but very low rates simply go out
of business and then the labour goes to those who by the market
are actually demanding it there. I understand the difficulties
we have about uncontrolled migration from the EU undermining that,
it is certainly having an impact in my area, but I want to ask
both of you about your experience of Scottish employers because
it is my impression that there are a substantial number of Scottish
employers who ought, in a sense, almost not be allowed to employ
people they are so bad in the sense of they are so miserable,
they want to pay the minimum amount and extract the maximum. Is
it simply a question of allowing the market to determine that?
Are the intervention mechanisms that we have at the moment for
enforcing the minimum wage sufficient or are there other mechanisms
that we ought to be using to tackle bad Scottish employers?
Ms Young: I think on the first
point about subsidising low paying employers, we certainly would
not argue for a blanket policy of subsidy. What we would be talking
about would be very targeted types of subsidy to help those businesses
which are viable but might not cope with a fast increase in the
minimum wage as well as some of the higher paying employers might
be able to. Sorry, what was the second point?
Q237 Mr Davidson:
The second point was relating to policing Scottish employers.
Ms Young: Yes, I think that is
definitely a big issue. From our point of view, probably the biggest
barrier to policing employers throughout the UK is the current
working of the employment tribunal system. I believe that is being
looked at at the moment so hopefully we might have some progress
on that within the next few years. With the minimum wage it is
a slightly improved point of view because you have actual compliance
teams who are able to investigate these things on people's behalf,
but in other areas employers can largely get away with a lot that
they should not be able to get away with because the onus is on
the individual to take action.
Mr Davidson: Just to follow that up,
this might be something that we maybe ask you to give us a note
about but my impression of the tribunal system was that basically
they came in after somebody had been sacked, once the employment
had terminated, and I was not conscious of them having an on-going
role in employment. Is there any mechanism that you have identified
that ought to be utilised or that we can recommend or that we
ought to be examining with a view to improving people's employment,
both their opportunities and work practices by Scottish employers?
Mr McGovern: They could join a union.
Q238 Mr Davidson:
We heard from the unions how difficult it was to get unions organised
in the rural areas and that was why they were so strongly in favour
of raising the minimum wage.
Ms Young: I think that the trade
unions definitely do have a role to play, but again for the vast
majority of employment issues throughout the course of employment
where there has to be enforcement of rights, it is a case of going
to an employment tribunal, which makes it very difficult especially
for those who do not have trade union representation, for whatever
reason, to enforce their rights. From our point of view, what
we would like to see is a move towards this kind of system that
they use for the national minimum wage where there is actually
a body who can come in and support people throughout the process
and actually investigate on their behalf rather than leaving it
to them to compile their own defence or employ a solicitor to
do so. I think also that it would be helpful—and I am about
to bang my own drum here—but services like the one we provide
and the one that Citizens Advice Bureau, some of which have employment
specialists, throughout the country, I think it is pretty essential
that we get the support we need to support those who do not have
recourse to trade unions or who are perhaps in some cases unwilling
to approach official departments such as HM Revenue and Customs
who currently deal with the minimum wage issue.
Q239 Chairman:
Do you have any idea what percentage of employers are not implementing
the national minimum wage?
Ms Young: No idea at all. I think
the only figures available on that kind of thing, you have a choice
of either the official statistics on employees earning less than
the national minimum wage, but they cannot be seen to show non-compliance
because quite a lot of people still are not entitled to a minimum
wage so therefore you cannot really use those. You would also
have the statistics that are brought out by Revenue & Customs
of the number of employers who have been investigated and found
to be not paying the minimum wage, but by that measure you lose
all the people who have not yet complained, so unfortunately there
is not.
21 http://www.dwp.gov.uk/publications/dwp/2006/harker/ Back
22
See Ev 74 para 2.3 Back
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