Part one:
EC project – Minimum Wage Systems and Changing Industrial Relations in Europe
National Report UK[1]
Damian Grimshaw, Claire Shepherd and Jill Rubery
September 2010
EWERC, University of Manchester
1. Introduction
The UK has a rather turbulent and patchy history of wage regulation for the low paid, with opposition to statutory wage-fixing from right-wing governments during the 1980s and early 1990s, as well as from trade unions prior to this in the 1960s and 1970s. But in 1999, the government introduced its first statutory national minimum wage (NMW) and it has for the most part been a success. It has a strong reputation among social partners, it has passed the economics test of not having caused job losses or wage-led inflation and it has made a positive contribution to social dialogue, through the operations of a well-functioning, independent tripartite body, the Low Pay Commission.
This national report reviews the functioning and performance of the national minimum wage and its interaction with the UK’s industrial relations system. In line with the broader objective of the five-country comparative project, it seeks on the one hand to identify the challenges a statutory minimum wage poses for unions, employers and government, especially those related to collective bargaining and social dialogue, and on the other hand to identify the ways in which social actors influence policy developments and how their influence interacts with wider union or employer strategies related to low pay and gender pay equity.
The report is organised as follows. Sections 2, 3 and 4 set out the institutional context of the minimum wage and industrial relations systems. Section 2 assesses the industrial relations background to the introduction of the NMW and reviews evidence relating to the consensual support for the Low Pay Commission. Section 3 reviews the development of minimum wage policy since its introduction and reports trends in its relative level. And section 4 sets out the contemporary industrial relations context to the functioning of the NMW, including evidence of a declining coverage of collective bargaining and growing segments of workers who rely on a properly enforced statutory wage floor. Sections 5 and 6 provide empirical details of pay equity and the low wage workforce. Section 5 identifies the composition of the minimum wage workforce and analyses the impact of the NMW on various measures of pay equity. Section 6 reviews pay trends in eight low paying sectors and provides summary portraits of key issues in each. Sections 7 and 8 report the findings from the original research conducted for this project. Section 7 describes the research method and section 8 analyses the evidence for each of the three selected pay agreements in the business cleaning, security and retail sectors. Finally, section 9 provides a reflection on the key findings, as well as insights for policy and practice in the arenas of pay equity, social dialogue and the national minimum wage.
2. The National Minimum Wage
2.1. The industrial relations context
The comparatively late implementation of a statutory national minimum wage in the UK in 1999 is largely explained by the rather turbulent history of trade union and employer strategies towards low-wage protection and, in particular, debates about the appropriate role of legislation in a traditionally voluntarist system of industrial relations. For most of the twentieth century, Britain’s low-wage workers were in fact protected by an alternative form of statutory wage regulation, that of sector-specific Wages Councils (formerly Trade Boards, introduced in 1909). Each Wages Council had the remit of recommending to government a statutory minimum wage for a specific sector (with distinctions for different occupational groups within each sector) following tripartite negotiations among industry and trade union representatives. From an initial coverage of four low-wage sectors (so-called ‘sweated trades’) and approximately 200,000 workers, by 1962 they covered 60 sectors and 3.5 million workers. Sector coverage initially required evidence of ‘exceptionally low’ pay but was extended to include evidence of an absence of adequate collective bargaining arrangements (Dobb 1944). As such, Wages Councils not only addressed exploitation (in specific sectors), they also supplemented voluntary collective bargaining through their wider remit to regulate hours and holidays as well as all aspects of wages (Bayliss 1962); indeed, the latter role arguably became their main function (Blackburn 1988).
However, their expanding role was met by growing opposition among trade unions, which became increasingly opposed to their functioning on the grounds that they were holding back the expansion of free collective bargaining (Bain 1999, Deakin and Green 2009). The unions’ position was bolstered by publication of several reports during the 1960s and 1970s, not least the assessment of the operation and performance of Wages Councils by the industrial relations scholar, Fred Bayliss. Bayliss (1962) argued that Wages Councils had expanded too far and that long-term full employment conditions rendered much of their presence ineffective in comparison to ‘the superiority of the voluntary system.’ Unions complained that Wages Councils did not establish regular pay settlements, that the very low pay awards exerted downwards pressure on collective agreed rates and institutionalised low pay, and that unions could not justify the costs of servicing Councils in industries with few union members (Blackburn 1988). Indeed, in her historical assessment Blackburn argues that during the late 1970s ‘the unions were probably more vociferous in their condemnation of the councils than any other group in society’ (1988: 131).[2]
In response to this prevailing view, the 1960s and 1970s saw the abolition of 27 Wages Councils covering around half a million workers. Later research showed that this did not bring about the anticipated resurgence of voluntary collective bargaining and low pay remained endemic due to various industry-specific conditions (Craig et al. 1982).
Nevertheless, Wages Councils were eventually undone as the result of a different ideological attack – that of neoliberalism, under the Conservative government of Margaret Thatcher. Their powers were limited during the 1980s[3] and abolition came in 1993 at a point when 26 Councils covered around 2.5 million workers (10% of the workforce) (Callaghan and Jones 1988, Kessler and Bayliss 1998). The principal actors spearheading abolition were from outside the mainstream of industrial relations social actors - the Institute of Directors (an association of business leaders well-known for its pro-market views) and the National Federation of Self-Employed and Small Businesses. Indeed, the Confederation of British Industry (CBI, the peak association for employer associations), the British Chamber of Commerce and the Institute of Personnel Management (now the CIPD, the Chartered Institute of Personnel and Development, the association for HRM managers) were opposed to abolition (Blackburn 1988). On the one hand, bodies such as the CBI were concerned abolition would strengthen union campaigns for a statutory national minimum wage. On the other hand, they also perceived a risk of worsening industrial relations, growing militancy among some groups of workers and false competition by disreputable firms (Blackburn 1988: 132).[4] It is also significant that it was effective lobbying by employers that led to the retention of statutory wage fixing in agriculture (Deakin and Green 2009: 208); the Agricultural Wages Board continues to fix statutory minimum wages for workers employed in agriculture in England and Wales (enforced by the government Ministry, Defra).[5]
Evidence of employment conditions in sectors previously covered by Wages Councils showed falling wages and no flourishing of collective bargaining (Machin and Manning 1994). Therefore, against the backdrop of free-market, right wing government policy, rising unemployment, loss of members and contraction of sectors where collective bargaining was strong, the TUC belatedly changed its position in 1986 and adopted for the first time a resolution in favour of a statutory national minimum wage. Employer opposition also weakened during the 1990s, reflecting both a pragmatic desire to influence the level at which it was set and a shift in mainstream economic thinking – associated with the empirical research of Card and Krueger (1995) among others. When a Labour Party government was elected in 1997, it established the Low Pay Commission to recommend the initial rate of a new national minimum wage, which was introduced in April 1999.
2.2. Social dialogue and the Low Pay Commission
Despite the problems associated with Wages Councils, as well as the broader context of comparatively adversarial industrial relations, the 11 years experience of a statutory national minimum wage in the UK seems to demonstrate that it is nevertheless possible for a tripartite body, the Low Pay Commission, to command a strong reputation among all social partners and to be seen to conduct labour market interventions effectively.
Set up in 1998, the Low Pay Commission (LPC) is an independent public body with a remit to recommend to government each year the rate of the national minimum wage (as well as two youth rates). Its membership is tripartite and thus may be said to continue the tradition of the Trades Boards of 1909 (Deakin and Green 2009). It has three members from employer bodies, three from trade unions, two academics and a chair from one of the three backgrounds. All nine individuals are requested to act in an individual capacity; they are not paid and requested not to act as representatives for their employer (so-called Nolan Committee principles).[6] The LPC is said to be insulated from ministerial influence (Brown 2000) and is assisted by a small secretariat from the civil service that includes economists, statisticians and policy experts (see LPC website[7]).
A key ingredient of the LPC’s apparent success lies in its commissioning and undertaking of extensive research on the operation and effects of the minimum wage, which feed into its detailed annual reports with recommendations to government. Deakin and Green commend the LPC as ‘one of the better examples of evidence-based policy making’ (2009: 210). The research includes a number of research projects undertaken by academics and specialist consultants (available on the LPC website), as well as an in-house survey of firms in low-wage sectors. The LPC also works closely with the Office for National Statistics (ONS) to improve earnings data, most notably following acknowledged problems with the quality of earnings data which caused a massive over-estimation of the number of workers who were believed to benefit from the initial minimum wage rate in 1999 (LPC 2003), and the subsequent admission that this caused the introductory rate to be set at too low a level.[8] In 2002 the ONS conducted a review of its methodology to estimate the number of low paid jobs (ONS 2002). This review also fed into work on the new national earnings survey, the Annual Survey of Hours and Earnings, which now includes better estimates of the number of low paying jobs (ONS 2004).
As a forum for social dialogue between unions and employers, Brown (2000, 2009) makes the case that the LPC has made a positive contribution to social partnership in the UK. Drawing on his personal experience as an LPC Commissioner for ten years, Brown (2000) suggests the LPC at its outset was reflective (and constitutive) of a new ‘industrial relations settlement’ brought about by the New Labour government elected in 1997. It was a moment when trade unions displayed a new confidence in their relationships, while employers were beginning to adopt a more pragmatic approach (op. cit.). The LPC established a busy schedule for its nine Commissioners, involving consultations with employers and workers, visits to low-paying firms (visiting four regions of the country each year) and taking oral and written evidence from a wide range of organisations. This ‘grass-roots consultative process’, Brown argues, was especially important in promoting a consensual approach within the LPC, by forging ‘a substantial network of shared insights and understandings’ (2009: 436). He describes this part of the work as follows:
Embarking on a series of one-day visits to different locations across the UK over a number of months, the Commissioners normally split into three groups, each balanced in ‘social partnership’ terms. They interviewed a diverse range of employers, employment interest groups, unemployed, and people with relevant labour market insights such as industrial priests, rural gang-masters, community workers, and probation officers. The choice of these was variously guided by organisations with regional knowledge such as Chambers of Commerce, Citizens’ Advice Bureaux, Low Pay Units and local Federations of Small Businesses. (Brown 2000: 19).
Its strongly consultative style, he argues, was established at the outset in response to two factors (op. cit.). First, there was an identified need to understand the idiosyncrasies of pay practices in low-wage sectors. Brown cites the examples of staff discounts in retail firms, night-time on-call among care workers in residential nursing homes, use of piecework rates and interaction with in-work benefits (especially how it shapes number of hours employed). Second, numerous organisations, public bodies and community groups came forward to offer advice and provide information. As a result of its wide-ranging consultations, Brown argues, the LPC was able to establish a strong reputation with all the different interest groups concerned with the minimum wage and thereby also establish early on its authority with government (op. cit.: 19-20). One indication of this is the fact that government has accepted its recommendations for the adult rate in every year so far. However, there have been two notable disagreements to date. It downgraded the youth rate in the first year by 20 pence and in the second year by 10 pence, arguing there was a risk it might adversely affect its flagship New Deal programme for the young unemployed – a major policy goal of the Treasury at the time (Peston 2005). And, until 2010, it refused to accept the LPC’s consistent recommendation since its first report in 1998 that the adult rate ought to extend to 21 year olds (see below).
In his assessment of its operation, Brown (2000, 2009) has praised the spirit of partnership among LPC members. On many issues, it would have been difficult for an outside observer, he argues, to identify the allegiance of a member to union or employer given his or her views on issues such as whether to include restaurant tips, a new rate for 16-17 year olds, or how to consider paid therapeutic work (Brown 2009: 434-5). There were, however, two areas of substantive disagreements between union and employer representatives – the level of the minimum wage and the need for a separate rate for young workers. Compromise on these issues, he argues, has been possible thanks to the experience of most members as professional negotiators. Also, it owes a lot to the ‘extended process of joint and mutual education’ of members in the form of visits to firms (four visits to different regions of the country each year), taking evidence and sifting through research evidence together (2000: 20; 2009: 436).
3. Minimum wage policy and impact
3.1. Changing rules
Since its inception there have been several developments in minimum wage policy, summarised in table 1. A first key change concerns the treatment of workers of different ages. When introduced in 1999, the minimum wage legislation applied an adult rate to workers aged 22 years and older and a youth development rate to workers aged 18-21 years old. The LPC consistently argued for the adult rate to apply to 21 year olds also and this was finally accepted by government in 2009 and applied from October 2010. Also, there was considerable debate about the treatment of workers younger than 18 years old. In light of evidence of their exploitation in various pieces of research, a new youth rate for workers aged 16-17 years was introduced in October 2004.
Other developments include the introduction of a new apprentice minimum in 2010 and the exclusion of all service charges and tips from calculation of the minimum wage, applied from October 2009. The latter change was a controversial issue with claims from the British Hospitality Association that 45,000 jobs could be lost as a result. However, the LPC founded its recommendation on the results of a consultation exercise, as well as evidence from independent research (eg. Williams et al. 2004). The LPC also faced pressures from high profile trade union campaigns (eg. by Unite) and press attention especially during 2008.
Table 1. Developments in minimum wage policy
| |Initial approach |Changes in policy |
|Age coverage of adult rate |22+years |Extension to 21+ years from October 2010) |
|Youth rates |Single youth (development) rate for age 18-21 |New youth rate for ages 16-17 (Oct 2004) |
| | |New age band for youth development rate of 18-20 (Oct|
| | |2010) |
|Worker coverage |All workers, including homeworkers, agency workers, |No change |
| |pieceworkers and commission workers | |
|Exempt workers |Self-employed, 16-17 years old |New rate for age 16-17 (see above) |
| |Apprentices aged under 19 or 19-26 in first 12 months|New rate for apprentices from 2010 |
| |of work | |
| |Certain family workers | |
| |Armed forces | |
| |Prisoners | |
|Pay considered for NMW |Gross pay, performance pay/bonuses, profit-related |All service charges, tips, gratuities to be excluded |
| |pay and service charges/tips paid through payroll; |from payment of the minimum wage (Oct 2009) |
| |offset for living accommodation | |
| |Excludes overtime, shift premia, special allowances | |
| |(eg London weighting), tips not paid through payroll,| |
|Hours worked |Pay for contracted hours or actual hours (includes |No change |
| |on-call/standby hours at place of work, travel time | |
| |on business and training time but excludes travel | |
| |time to and from work, rest breaks, industrial | |
| |action) | |
Source: compiled from LPC (1998, 1999, 2004, 2009, 2010) and Lourie (1999).
3.2. Changing trends in the value of the NMW
As Brown (2009) notes, the major area of conflict among LPC Commissioners, as well as their constituent organisations – trade unions and employers – is the level of the minimum wage. Its initial level of £3.60 per hour in 1999 faced wide-ranging criticism as too low. The Low Pay Unit and many trade unions had campaigned for a level at half male median earnings – approximately £4.40 at the time. Moreover, they pointed to comparisons with other European countries (eg France and Ireland) where the minimum wage was at the time 50% or higher (see Rubery et al. 2002: table 4.4). However, the then Chair of the LPC defended the initial level against what he called the ‘mechanistic formula’ of half male median earnings and, furthermore, argued for the use of median earnings for all employees as a more appropriate benchmark (Bain 1999).
Not only was the initial level low, the LPC’s cautious approach extended to its second year recommendation of an increase of just 10 pence (less than 3%) at a time of average annual earnings growth of 5%. Thus, during its first two years the minimum wage actually dropped relative to median earnings (figure 1).
Figure 1. Trends in the adult minimum wage relative to average and median hourly pay for all employees, 1999-2009
[pic]
Note: Pay data for all employees include male, female, full-time and part-time employees.
Source: Annual Survey of Hours and Earnings (gross hourly pay excluding overtime); own compilation.
Subsequent years witnessed a radical change. In the context of general confidence about steady economic growth and low inflation, as well as access to better quality revised low pay estimates, the LPC revised its approach. For the period 2003 to 2006, it argued explicitly for rises in the minimum wage in excess of projected average earnings growth. The following excerpt from its 2003 report illustrates its new thinking.
Our aim is to have a minimum wage that helps as many low paid people as possible without any adverse impact on the economy. We therefore believe there is a strong case for a significant step up in the level over the next few years, contingent on economic circumstances. … Most stakeholders accepted the case for uprating, with some arguing for a significant increase but with others advocating an indexation with prices. The latter approach would, however, lead to a steady withering of the minimum wage – a view the Commission cannot support. We therefore believe that there is a case for increasing the effective level of the minimum wage, implying a series of increases for a number of years above average earnings, and increasing gradually the number of people benefiting. (LPC 2003: 173)
Again, the impact on the minimum wage trend is notable. While it dipped from 36.7% to 34.2% of average earnings between 1999 and 2001, and then fluctuated during the next two years, from 2003 to 2007 it jumped four percentage points from 35.7% to 39.8% (figure 1). Relative to median earnings it increased five points from 47.5% to 52.7%.
However, support for this approach quickly weakened among employer bodies, even prior to the recession of 2008-09. In 2005, the CBI was already calling for alignment with average earnings growth (Grimshaw 2008). In 2006, with some anxieties about labour market performance, the LPC reverted to its cautious stance and stated that the phase of recommending rises above average earnings growth was over. It argued that the 2003-06 rises constituted an appropriate adjustment of the minimum wage but in subsequent years it would not presume further increases above average earnings would be required (LPC 2006: vi; see table 2). The trend line in figure 1 shows a small fall relative to median earnings and a flat trend relative to the mean during 2007-09.
Table 2. Changes in the adult minimum wage and average gross hourly earnings, April 1999 – April 2010
| |Adult |Annual |Average |Annual |
| |rate |change |earnings |change |
|1999 |£3.60 |-- |£9.82 |-- |
|2000 |£3.60 |0.0% |£10.21 |4.0% |
|2001 |£3.70 |2.8% |£10.81 |5.9% |
|2002 |£4.10 |10.8% |£11.39 |5.4% |
|2003 |£4.20 |2.4% |£11.76 |3.2% |
|2004 |£4.50 |7.1% |£12.04 |2.4% |
|2005 |£4.85 |7.8% |£12.55 |4.2% |
|2006 |£5.05 |4.1% |£13.03 |3.8% |
|2007 |£5.35 |5.9% |£13.43 |3.1% |
|2008 |£5.52 |3.2% |£13.99 |4.2% |
|2009 |£5.73 |3.8% |£14.43 |3.1% |
|2010 |£5.80 |1.2% |Not available |‘-- |
Note: The minimum wage for each year is reported here for April in order to coincide with earnings data. The minimum wage is uprated annually and runs from October through to September the following year.
Source: ASHE earnings database (gross hourly pay for all employees) and LPC website. Own calculations.
The impact of the recession[9] has reinforced this cautious approach. The recommended rise for October 2009 was the smallest yet recorded - just 1.2% (7 pence) - in the context of fears over job loss and high unemployment. The issue of what to do in the midst of a recession polarised opinion between employers and unions. For the first time, the LPC received requests from employers for a freeze in the minimum wage for 2009, including from the peak association, the CBI. It also faced dramatic last-minute appeals from the TUC to ignore such requests.[10] Table 3 gives an indication of the polarisation of opinions between unions and employer bodies regarding the appropriate adult minimum wage rate for October 2009.
The fluctuating trend level of the minimum wage and the swings in approach of the LPC raise the question of whether some sort of automatic indexation system ought to be adopted. At the time of introducing the minimum wage legislation the decision not to have an automatic indexation system was quite controversial. It had previously been included in the Labour Party’s manifesto prior to its 1992 election defeat, but was subsequently removed (Deakin and Green 2009: 210). Its absence leaves the LPC and the government open to the charge of interference for political gain (Sachdev and Wilkinson 1998), although Brown (2009) finds no evidence of this. Of course, had an automatic indexation system been introduced from the outset it is unlikely the minimum wage would have increased relative to average earnings in the way that it has (from 36.7% to 39.7% over 1999-2009), unless some sort of ‘tracker index’ could have been designed – say, average earnings growth plus 0.5%. The only modification in this regard has been an amendment to the legislation so as to grant a permanent role to the LPC, but no change in the government’s right to reject its recommendations.
Table 3. Recommendations to the Low Pay Commission for the 2009 NMW uprating
(actual rate subsequently set at £5.80)
|Unions: |Recommended adult rate |Employers: |Recommended adult rate |
| CWU |£6.50 | Association of Convenience Stores |Freeze |
| | | |(ie £5.73) |
| GMB |£7.00 (but supports TUC position) | British Apparel and Textile |Freeze |
| | |Confederation | |
| PCS |£8.25 | British Beer & Pub Assoc’n |Freeze |
| Unison |Calls for £7.45 by Oct 2010 | British Chamber of Commerce |Freeze |
| Unite |£6.71 | British Hospitality Assoc’n |Freeze |
| USDAW |£6.00 | British Retail Consortium |£5.90 |
| | | |(‘less than 3% rise’)1 |
| | | Business in Sport and Leisure |Freeze |
| TUC |‘More than £6.10’ | Federation of Small Businesses |Freeze |
| | | Scottish Licensed Trade Assoc’n |Rise with inflation |
| | | | |
| | |CBI |Freeze |
Notes: 1. This recommendation was subsequently revised in March 2009 down to a rise of between 1% and 1.5% (no more than £5.82).
Source: LPC (2009: 228-231) and documents accessed from relevant organisational websites relating to evidence submitted to LPC during 2008 in time for the 2009 LPC report. Own compilation.
4. Interaction with the industrial relations system
As noted elsewhere (Grimshaw 2009), there has been little research attention since 1999 devoted to the issue of how a statutory minimum wage impacts upon features of the UK’s industrial relations system, particularly with respect to the approaches of employers and unions towards collective bargaining. This is surprising in light of our discussion above of the turbulent history of low-wage protection. Unions, especially, debated the proper role of statutory intervention in a voluntarist model of industrial relations and expressed concerns over its implications for their ability to mobilise new members, for example, or for their power to set a decent minimum rate in collective agreements. Today all major trade unions (and most employer bodies) support the national minimum wage and accept that it provides much needed protection in a labour market characterised by weak and patchy collective bargaining coverage. Unions and employers actively influence deliberations within the LPC about the appropriate level of the minimum wage, differentiation of youth rates, enforcement issues and so on. At the same time, the statutory minimum wage also directly shapes social dialogue between unions and employers, including around the setting of minimum rates in collective agreements and how to address gender equity and low pay at the workplace. This interplay of effects is likely to be especially strong in low wage sectors where the statutory minimum impacts upon a large share of workers. We assess these issues in the following discussion.
4.1. Key issues
Trends in the level of union membership and the share of workers covered by collective bargaining certainly confirm the continued relevance of a statutory minimum wage for the UK labour market. Union membership has remained relatively high in the public sector, with around 57% of employees registered as members, but is very low in the private sector with a union density of only 16% (Q4 2008 data, Barratt 2009: table 1.3). The trend since 1994 suggests a steady decline from 61% in the public sector and from 21% in the private sector (op. cit.).
Alternative data on the proportion of employees who have a trade union present in their workplace point to a similar slow but steady downwards trend. Figure 2 presents these data alongside data on collective bargaining coverage, disaggregated by public and private sectors.
Figure 2. Trends in union density, union presence at the workplace and collective agreement coverage, 1995-2008
[pic]
Source: Barratt (2009: tables 1.3 and 5.1). Own compilation.
Across different groups of workers there are wide differences in levels of union density (2008 data, Barratt 2009: table 4.3). Employees with a flexible employment status, such as a temporary contract, zero hours contract, or working mainly at home, have a lower than average union density. Also, while 22% of part-time workers are union members, this compares to 30% of full-timers. Having said that, women are more likely to be members of a union than men – 29% and 26%, respectively. Workers who identify themselves as Black or Black British are more likely to be union members than white workers or other ethnic minority groups, especially women for whom density is 34%.
Of special interest for our research is the segmentation among union members by level of earnings (table 4). Lowest paid workers are least likely to join a trade union and this is true for male and female workers, full-time and part-time workers. Women have higher shares of union members at all levels of weekly earnings shown. And part-time workers in the middle earnings categories have higher union densities than full-timers whatever the level of earnings. This is an interesting result since it suggests it is the level of pay not the part-time working hours contract that acts as the obstacle to joining a union.
Table 4. Trade union density by weekly earnings and by sex and full-time/part-time
(Q4 2008, UK employees)
|Weekly earnings in main job |All workers |Male |Female |Full-time |Part-time |
|Less than £250 |16.3 |11.4 |18.2 |14.0 |17.3 |
|£250 to £499 |30.6 |28.2 |33.3 |28.8 |45.0 |
|£500 to £999 |37.9 |34.0 |46.0 |37.7 |43.4 |
|£1000 and above |20.3 |18.1 |28.1 |20.3 |-- |
Source: adapted from Barratt (2009: table 4.3).
Unlike other European countries, in the UK there is very limited statutory intervention to extend collective agreements as a means to patch over some of these gaping holes in wage regulation. The one example is the so-called ‘Two-Tier Code’ which extends public sector jointly regulated terms and conditions to private sector workers employed by companies providing outsourced services (Grimshaw 2010b). During the 1990s, trade unions (especially Unison) brought to public attention the adverse impact of public sector outsourcing on the employment conditions of cleaners, porters and other ancillary workers. Evidence showed that new recruits in the subcontractor firms earned considerably lower rewards than employees who had transferred from the public sector with protected terms and conditions in line with the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).[11] The Government agreed to act. In 2003, an initial version of “The Two Tier Code” was applied to local government outsourcing, and in March 2005 it was extended to other areas of the public sector (Cabinet Office 2005). It is a limited solution, however, since it still excludes parts of the public sector, applies only to firms with transferred employees and lacks effective monitoring of workforce conditions (Unison, 2008) – but it has improved matters. In the National Health Service, all private firms with a contract to deliver services to an NHS organization must offer new recruits who work alongside staff transferred from the NHS ‘employment on fair and reasonable terms and conditions, which are, overall, no less favourable than those of transferred employees’ (Cabinet Office 2005: 2). In effect, this extends the conditions agreed in the national public sector pay agreement to private subcontractor firms.
Nevertheless, the UK model of industrial relations leaves a great number of workers in low wage sectors vulnerable to poor and exploitative terms and conditions of employment. Pollert and Charlwood’s survey of 501 low paid, non-unionised workers provides a valuable insight. The number one problem experienced by these workers in the previous three years is pay – such as not being paid the correct amount, not being paid regularly or not receiving pay for holidays, for example (2009: table 2). Also, their survey highlights the failure by most workers to find a satisfactory solution to the problems they experience at work; and contrary to the exit-voice analogy, most workers with problems appeared to stay in their job (op. cit.: 353-4).
This raises the issue of enforcement of the statutory minimum wage, which has arguably been a relatively neglected issue of investigation. Indeed, a curious feature of the otherwise excellent earnings data for the UK (ASHE) is that each year the Office for National Statistics reports the number of employees earning below the national minimum wage but does not distinguish between those lawfully paid the minimum (trainees, apprentices and others with an accommodation offset) and those whose employer is non-compliant. Further investigation of the issue of non-compliance is thus required. The legislation provides for two routes for enforcement – workers can take their case to an employment tribunal (or civil court) or the HMRC can take investigative action, either in response to a worker’s complaint or proactively identify a high risk employer. HMRC employs 153 compliance officers to enforce the minimum wage. In 2007-08 they completed around 4,500 investigations into underpayment, of which 36% of employers were shown to be non-compliant and average arrears owed to workers were £202 (LPC 2009: 192). In the last three years, the sector that has consistently registered the most complaints by workers using the HMRC helpline is hospitality (op. cit.: figure 7.1).
However, critics of the system argue the government over-relies on employers’ self-regulation and provides insufficient protection for the individual worker afraid by being victimised by making a complaint; Croucher and White (2007) argue the government is sensitive to accusations of over-regulation and has therefore not taken the steps necessary to maximise compliance. Trade unions have no role in enforcement (unlike under Wages Councils) so there is no collective protection from individual victimisation (op. cit.: 146). Unions are pressing for change and in its 2008 evidence, Usdaw called on the LPC to allow unions to represent a group of individuals at an employment tribunal (LPC 2009: 193).
5. Minimum wage workers and the impact on wage inequality trends
The overall improvement in the relative level of the minimum wage has contributed to compression of the wage structure at the bottom, raising the lowest decile pay relative to the median. Also, because most minimum wage beneficiaries are women, it has made a significant contribution to a narrowing of the gender pay gap. Nevertheless, there are three obstacles to progress on pay equity. The first is the continued widening of wage inequality at the top end of the distribution, which has offset much of the positive effects of the minimum wage at the bottom end. The second is the persistent wide gap between the pay of female part-time workers and full-time workers; this suggests a highly restrictive pattern of labour market segmentation for women in low-wage, part-time jobs with limited opportunities for pay advancement. And the third is the weakening of the jointly regulated wage-setting mechanisms reported above, which act to offset much of the benefits of a rising NMW.
5.1. Who works in minimum wage jobs?
There were an estimated 1.13 million minimum wage jobs in April 2008, 4.3% of all jobs in the UK labour market (LPC 2009). Some workers are far more likely than others to be employed in a job paying the minimum wage. These include:
• women
• women in part-time jobs
• young people
• least skilled
• people with work-limiting disability
• ethnic minorities
• migrant workers
Minimum wage jobs in the UK are strongly gender segregated. Close to two thirds of minimum wage jobs are held by women and more than half are part-time jobs. Over the period 2004-2008 figure 3 shows that women in part-time jobs are the dominant group employed in minimum wage jobs. There has, however, been a small decline in the share of female part-time workers in minimum wage jobs, from 49% to 45%, and a small rise in the share of male part-time workers from 12% to 14%.
Figure 3. Minimum wage jobs by sex and full-time/part-time, 2004-2008
[pic]
Source: LPC (2005: fig 2.1; 2007: fig 2.8; 2009: fig 2.4). Own compilation.
A second characteristic of minimum wage jobs is the over-representation of young workers. More than 60% of young people aged between 16 and 21 years of age work in a low paying industry, which is double that of all age groups (LPC 2009). In 2008, 7% of 16-17 year olds in employment and 6% of 18-21 year olds earned the respective youth minimum wage, compared to around 3% among core-age workers who earned an adult minimum wage. Reviewing the impact of the new youth rate for 16-17 year olds, the LPC found that ‘so far there has not been any evidence of a detrimental impact of the minimum wage on young people’s participation in education’ (LPC 2008: 78). A notable feature is the much larger share of young workers aged 18-21 years paid the adult minimum wage rather than the youth rate; in 2008 just 6% of 18-21 year olds earned the youth development minimum wage compared to 80% who earned the adult rate (LPC 2009: 134-135).
Least skilled workers are also more likely than skilled workers to earn a minimum wage – 18% compared to 5% (LPC 2009: 17). Another group for whom the minimum wage is an important form of wage protection is workers with a work-limiting disability. Close to 10% of the UK workforce (2.1 million) are defined in this way (LFS 2008). Part time work is more ubiquitous than full time employment and over 8% earn the minimum wage compared to 5.6% among workers with no disabilities (LPC 2009: 17).
Workers from an ethnic minority background also face a disadvantage. In 2008 there were 2.5 million ethnic minority workers and approximately 8% earned the minimum wage compared to less than 6% of white workers (op. cit.). As with the gender pay gap (see below), the ethnic minority wage gap has narrowed as a result of the larger share of ethnic minority workers benefiting from minimum wage rises above average earnings over the last decade (op. cit.).
A final group of workers is migrants. The number of migrant workers entering the UK labour market has increased substantially since the 2004 expansion of the EU. While many of the migrant workers are highly skilled, a large proportion work in low wage sectors (Dustman et al. 2007). Research on the influence of migrant workers on employment and unemployment in the UK has concluded that their impact has been modest but predominantly positive (Gilpin et al. 2006). However, Dustman et al. (2007) show that while the effect on average earnings has been positive, inflows of migrant workers have caused a negative effect on the lower deciles of the earnings distribution. The LPC estimates that 8.8% of adult migrant workers (workers born outside the UK) earn a minimum wage compared to 5.6% of non-migrant workers (LPC 2009: 111).
5.2. Key trends in measures of pay equity
Given the skewed composition of minimum wage workers, together with the positive improvement in the minimum wage since its introduction in 1999, what are the trends in key measures of pay equity? Here we interrogate measures of gender wage inequality and low wage work.
Gender wage inequality
Analysis of the trend in women’s pay relative to men’s suggests that while the introduction of the minimum wage in 1999 had limited impact, the period during which the LPC purposely increased the relative level of the minimum wage (see above) is associated with a significant narrowing of the gender pay gap, especially for women in part-time employment.
The trend from 1984 indicates pay progress for women during 1987-1995 and then no significant change until 2002, despite the introduction of the minimum wage in 1999 (figure 4). The lack of progress fits with Robinson’s (2002) simulation of the effect of the minimum wage on the gender pay gap which suggested the low initial level of the minimum wage accounted for its limited impact (op. cit.: 431). It is also notable that the main beneficiaries of improvements in gender pay equity during the period preceding the introduction of the minimum wage were women in full-time employment rather than women in part-time employment.
Figure 4. Trends in women’s average pay relative to male full-time workers, 1984-2009
[pic]
Note: The methodology for collecting earnings data changed in 2003. Data for 1984-2003 are from the New Earnings Survey and data for 1997-2009 are from the Annual Survey of Hours and Earnings (which has been projected backwards to 1997). For both, the figures refer to average gross hourly earnings for female employees (full-time, part-time) as a share of average gross hourly earnings of male full-time employees. Earnings include overtime and cover employees on adult rates whose pay for the survey period was not affected by absence. For the 1984-2003 trend line, average pay for all female employees is calculated using employment data for female full-timers and part-timers from the Labour Force Survey data (because of inaccuracies in the NES coverage of female part-timers).
Source: New Earnings Survey and Annual Survey of Hours and Earnings, various years.
However, significant progress is registered during the period 2002 to 2007. Women’s average pay compared to men’s in full-time employment increased four percentage points during these years, from 74% to 78%. This is now an important recognised effect among members (and ex-members) of the LPC. Metcalfe, for example, states that it is ‘plausible that the NMW made a significant contribution to this compression in the gender pay gap’ (2006: 492). And in its 2009 report, the LPC states that, ‘the general reduction in the gender pay gap since 1998 provides evidence that the minimum wage is having a greater impact on women’s earnings than it is on men’s’ (LPC 2009: 101). It is significant, however, that the improvement has been far stronger among women part-timers – an increase from 58% to 64% compared to male full-time average earnings – than among women in full-time work – an increase from 81% to 83%. This difference points to the clear impact of the rising relative level of the minimum wage during 2003-06 since we know that women in part-time jobs are the main beneficiaries of increases. Nevertheless, it is worth noting that the average hourly pay of female part-timers remains very low compared to the position of female full-timers, at less than two thirds (64.4%) of male full-time average earnings in 2009.
Figure 5 demonstrates more precisely the close match between movements in the relative level of female part-time average earnings and the trend in the level of the minimum wage relative to average earnings. The relative pay of female part-timers suffered, albeit with a 12 month lag, as a consequence of the drop in the relative level of the minimum wage during 1999-02. The subsequent period shows a strikingly similar development in the trend increase in female part-time pay and the minimum wage. Again, this close association reflects the large share of female part-time workers in low wage jobs, far more than women in full-time jobs, who benefit from the minimum wage.
Figure 5. Trends in women’s relative pay (full-time and part-time) compared to the relative level of the minimum wage, 1999-2009 (1999=100)
[pic]
Low wage work
Increasing the relative level of the minimum wage causes a direct improvement in the relative earnings position of low wage workers. In their detailed analysis for the period 2001-2006, Dickens et al. (2009) find that the ‘strongest wage growth was at the bottom of the wage distribution in most years and for those directly affected by increases in the NMW’ (op. cit.: 48). Here, we support these findings by presenting the trend in the relative level of earnings at the lowest decile relative to average earnings (figure 6). Relative to average hourly pay for male full-timers, the bottom decile for all employees increased from 0.456 to 0.477 from 1999 to 2009. Closer inspection reveals that the gains are entirely due to an improved position among female workers, especially those in part-time employment. The lowest decile pay of women in part-time jobs improved from 0.401 to 0.443, an increase of 10% relative to changes in average male full-time pay. Again, the slowdown in minimum wage rises since 2007 is strongly evident with a fall in the bottom decile wage for all groups of workers during 2007-9.
Figure 6. Trends in the bottom decile wage (D1) relative to average male full-time earnings, 1999-2009
[pic]
Source: ASHE earnings database. Gross hourly earnings excluding overtime.
An alternative indicator of trends among the low paid is the estimation of the share of employees in low wage employment. Here, we follow the current convention (see Grimshaw 2010a) and define low pay as two thirds of median hourly earnings of all employees (using gross hourly pay excluding overtime). Again, female part-timers appear to be the main beneficiaries, although for a shorter period of time, 2001-2005. Despite this, low wage work still accounted for 43.0% of women’s part-time jobs in 2009. Overall, unlike the bottom decile measure of low pay, the share of low wage workers has remained at a stubbornly high level over the 10-year period - at just over one in five employees, 21.7% in 2009 (figure 7). Part of the explanation lies in the simultaneous contraction of collective bargaining coverage, which has partially offset improvements in the statutory wage floor.
Figure 7. Trend in the incidence of low pay by sex and full-time/part-time, 1999-2009
[pic]
Notes: Low pay defined as two thirds of median earnings of all employees (gross hourly pay excluding overtime).
Source: ASHE earnings database. Own calculations based on estimations of hourly earnings that fall between published figures for D10, D20, D25 and D30, where appropriate.
6. Selected low paying sectors
In this section we review patterns of pay in a selection of eight low paying sectors in order to provide a more detailed picture of the contextual conditions and roles of social actors in each sector. The sectors were selected in part to provide fruitful comparison with the other four countries included in this project. They do not represent all sectors with the highest shares of low wage work in the UK; other candidate sectors include hairdressing, childcare and agriculture.
6.1. Pay trends
Table 5 sets out median hourly pay in the eight sectors compared to pay for all sectors of the economy. Across all sectors, female part-time workers’ hourly pay is well below the median for all employees in all sectors, as well as below the pay of full-timers in the respective sector. Hospitality, cleaning and retail record the lowest median earnings for all employees, and hospitality also has the lowest earnings across every employee type, confirming that it is the lowest paying sector in the UK; the median hourly pay for female part-timers in hospitality is only 3 pence above the adult minimum wage of £5.73.
Table 5. Median hourly pay in selected sectors, April 2009
(Adult minimum wage £5.73)
| |All Employees |Male Full-time |Female |Female |
| | | |Full-time |Part-time |
|Construction |£12.00 |£12.57 |£10.50 |£8.33 |
|Food Processing |£8.94 |£9.72 |£7.88 |£6.58 |
|Security |£8.11 |£8.07 |£8.79 |£7.15 |
|Clothing |£7.75 |£10.15 |£7.45 |£6.63 |
|Care |£7.67 |£9.34 |£8.05 |£6.97 |
|Retail |£6.95 |£9.28 |£7.80 |£6.25 |
|Cleaning |£6.50 |£8.54 |£7.67 |£6.02 |
|Hospitality |£6.21 |£7.35 |£6.90 |£5.76 |
|All sectors |£10.99 |£12.97 |£11.39 |£7.86 |
Source: ASHE earnings database (gross hourly earnings excluding overtime).
All sectors except construction have above-average shares of employees in low wage work, defined as two thirds of the median for all employees (figure 8). The hospitality sector registers the highest incidence of low wage work with a share of 70%, compared to 22% for the whole economy. Female part-time workers have by far the highest incidence of low pay across all sectors, with the exception of clothing where women in both full-time and part-time jobs are equally low paid. The risk of low pay is especially high for female part-timers in hospitality (a staggering 88%) and cleaning (81%). Finally, only female full-time security employees have a lower pay incidence, at 20%, than their male colleagues at 34%; however this could be attributed to the predominance of male workers within that sector and issues of data reliability.
Figure 8. Low pay incidence in nine selected sectors, by sex and full-time/part-time, 2009
[pic]
Source: Annual Survey of Hours and Earnings (gross hourly pay excluding overtime); own compilation.
An alternative indication of low wages in the eight sectors is presented in table 6 which presents the hourly wage at the lower quintile of the wage distribution in each sector, indexed to the adult national minimum wage. It is quite clear that at least 20% of workers in several sectors (notably cleaning, retail, clothing and care) earn wages very close to (and even below) the minimum wage. Among female part-time workers, the lowest quintile wage is within 10% of the minimum wage in all sectors except construction.
Table 6. Hourly pay at the lowest quintile (D20) indexed to the adult minimum wage, 2009
| |All Employees |Male |Female |Female |
| | |Full-time |Full-time |Part-time |
|Construction |1.49 |1.60 |1.38 |1.13 |
|Security |1.20 |1.17 |1.28 |1.09 |
|Food Processing |1.17 |1.25 |1.11 |1.01 |
|Care |1.08 |1.20 |1.10 |1.05 |
|Clothing |1.05 |unreliable |1.02 |unreliable |
|Retail |1.04 |1.20 |1.10 |1.01 |
|Cleaning |1.00 |1.13 |1.07 |1.00 |
|Hospitality |unreliable |1.04 |1.01 |0.96 |
|All sectors |1.25 |1.42 |1.35 |1.06 |
Source: ASHE earnings database (gross hourly earnings excluding overtime).
Figure 9. Trends in median pay in nine sectors, indexed to median pay for all sectors, (all employees) 1999-2009
[pic]
Source: Annual Survey of Hours and Earnings (hourly pay excluding overtime); own compilation.
Trends in median earnings are depicted in figure 9. Hospitality has remained the poorest paid sector across the period since the introduction of the NMW in 1999. Two sectors have in fact decreased relative to median pay for all employees each year; the retail sector has dropped from 64.9% in 1999 to 63.2% in 2009 and the food processing sector is eight points down from 89.7% to 81.3%, indicative of the pressures on manufacturing from overseas competitors, as well as the squeeze from powerful retail purchasers. Meanwhile the construction sector began the period at an equivalent rate to median pay for all workers, followed by a fairly rapid increase peaking in 2007 with a positive differential of more than 10%.
6.2. Summary portraits of selected sectors
Retail
Retail is the largest low paying sector in the UK. There were nearly 3.4 million employees in the retail sector in December 2008, accounting for around 40% of all jobs in what the LPC refers to as ‘the low-paying sectors’ (LPC 2009). The recession caused job losses in the sector as a whole but these were in wholesale and motor trade rather than retail, especially food.
One feature of the sector is the high concentration of jobs paid at or around the minimum wage; 10% of jobs are paid at or just above the minimum wage. The average differential between the established adult rate paid by major retail firms and the national minimum wage has fallen from 15% to 5% between 1999 and 2007 (table 7). With its high concentration of female part-time workers, this raises issues of obstacles to pay advancement and career progress. In many retail firms, even where employees develop their career, the degree of pay advancement is very limited (see, for example, IDS 2009: table 3.8).
Table 7. Percentage differential between established rate and the national minimum wage, 1999-2007
[pic]
Source: IDS (2009: table 1.5).
Nevertheless, in the last couple of years there appears to have been some movement among employers away from use of the minimum wage as the going rate for new starters, aided by the smaller rises since 2007. The IDS (2009) research found that one third of retailers in 2008 set the adult minimum wage as their employee starting rate, compared to two thirds in 2006 (cited in LPC 2009: 65). Earnings data confirm this and show a reduction in the proportion of workers paid the adult minimum wage and an increase in the proportion of those paid just above it; the LPC welcomes this new trend arguing it demonstrates ‘a shift by this sector away from being minimum wage employers’ (LPC 2009: 61).
Table 8. Summary characteristics of eight selected sectors, 2008
| |Union density |Key social actors |No. of jobs, thousands |% of employees paid | |
| |(approx.)1 | |(07-08 change)2 |at/below3 |Wage issues |
|Sector | | | | | |
| | |Unions |Employers | |MW | |
|Retail |12% |Usdaw, GMB |British Retail Consortium |3,370 |10% |Narrow differential between MW and |
| | | | |(decline) | |established rate |
| | | | | | |Limited use of youth rates |
|Hospitality |5% |Unite, GMB |Association of Licensed Multiple |1,750 million (decline) |31% |Very high impact of NMW upratings |
| | | |Retailers | | |Erosion of pay differentials |
| | | |British Beer&Pub Assoc’n | | | |
| | | |British Hospitality Assoc’n | | | |
|Social care |? |Unison |UK Home Care Assooc’n |1,200 million (rise) |8% |Problem of local authority fees not keeping|
| | | |English Community Care Assoc’n | | |pace with MW upratings |
| | | | | | |Erosion of all pay differentials |
|Clothing4 |? |Community, GMB, Unite |British Apparel&Textile Federation |90 |9% |Pressure for cuts in real earnings |
| | | | |(decline) | | |
|Cleaning |? |Unite, Unison |Cleaning&Support Services Association |480 |25% |High incidence of low pay |
| | | | |(decline) | |Problem of passing on costs to clients |
|Security |? |GMB |British Security Industry Assoc’n |180 |4% |Very few employees paid at or around the MW|
| | | | |(rise) | | |
|Food processing |? |Bakers, Food&Allied Workers |Food & Drink Federation |350 |5% |Clear evidence of pay compression |
| | |Union, GMB, Unite, Usdaw | |(decline) | | |
|Construction |15% |GMB, UCATT, Unite |Engineering Construction Industry |-- | | |
| | | |Assoc’ | | | |
Notes and sources: 1. Approximate estimate from industry 1-digit data published in Barratt (2009: table 2.2). 2. No. of employees in December 2008 published in LPC (2009: table 3.2). 3. LPC (2009: table 3.1). 4. Jobs and pay data refer to the broader sector ‘textiles and clothing’.
Hospitality
As we described above, hospitality is among the lowest paying sectors in the UK. It has suffered during the recession with two successive years of job losses recorded so far during 2007 and 2008. Almost one in three jobs are paid at or below the national minimum wage and, as a result, it is identified as the sector with the highest proportion of employers who needed to raise pay rates as a direct result of the 2007 rise in the national minimum wage – including some 67% of fast food and pubs employers (IDS 2009: table 1.1); it is a sector, as the IDS study states, that ‘does not typically operate pay progression’ (op. cit.: 27). It is also the sector where employers were most likely to identify previous upratings of the minimum wage as leading to job losses or adjustments in working hours – although unions have pointed to high rates of profitability in the leading hotel chains (LPC 2009: 70).
As in the retail sector, Income Data Service research from 2007 found that across fast food, pubs and restaurants a primary consequence of the October 2006 uprating was a narrowing of pay bands, specifically tightening pay differentials between team members and supervisors (LPC 2008). The LPC received evidence from a number of employer bodies that the erosion of pay differentials had made it difficult to offer employees suitable incentives for training and accepting tasks with more responsibility, although this is contested in the TUC’s evidence to the LPC (see LPC 2009: 69-70). Use of youth rates is mixed. Hotels are more likely to apply the adult minimum wage to workers regardless of age whereas greater use of the two youth rates is common among pubs and restaurants (LPC 2009: 68).
Social care
Social care is mostly provided by private sector firms but with revenues mostly deriving from public expenditures, managed through local authorities and the National Health Service. There is also a small share of voluntary sector providers of care services as well as remaining specialist care services provided by local authority departments. Laing and Buisson (2008) estimate the value of the UK residential care market in 2008 at £13 billion, of which around 70% is private, 14% voluntary and 16% public (cited in LPC 2009: 71). The private homecare market is estimated at £3.2 billion (op. cit.).
A key issue in this sector concerns the regulations over staffing levels and employee qualifications, which are likely to reduce the direct employment effects of the national minimum wage. A second is the public-private differentiation of employment conditions. For example, in the private sector 7.8% of jobs were paid at the minimum wage in 2008 compared to just 1.3% in the public sector (LPC 2009: 71). Also, an NVQ level 2 qualified care worker in the not-for-profit sector was paid 23% more than a worker in the same job in the private sector (IDS 2009: 40). The difference reflects the influence of collective bargaining and joint agreements for local authority employed care workers and their general absence in the private sector. And a third issue, in common with retail and hospitality, is erosion of pay differentials. The pay differential between qualified care workers with NVQ Level 1 and Level 2 narrowed significantly after the 2007 uprating of the NMW (IDS 2009).
A common theme raised by social actors in their evidence to the LPC concerns affordability, since local authority fees typically do not rise sufficiently to cover increases in costs, including the uprating of the national minimum wage. In its 2009 report, the LPC therefore repeated its recommendation to government that commissioning policies of local authorities reflect the actual costs of care, including the minimum wage (2009: 73). The LPC has also raised new concerns that policy reforms to enable individuals to purchase their own care may increase problems of non-compliance with minimum wage legislation: ‘In circumstances of individuals purchasing their own care, both the service user and those performing the personal assistant role not be fully aware of their rights and responsibilities in respect of their employment relationship, including payment of at least the National Minimum Wage’ (LPC 2009: 73).
Cleaning
The cleaning sector is one of the lowest paying sectors in the UK, along with the hospitality sector. It has experienced rising volumes but falling employment in the last couple of years. During the recession the contract cleaning market enjoyed a rise in revenues during 2008 to nearly £6 billion but a fall in number of employees of around 2% (LPC 2009: table 3.2 and page 77). Moreover, it appears to be expanding with an ever increasing concentration of jobs paid at around the minimum wage. It is the sector with the highest proportion of jobs paid the minimum wage (22% in April 2008); figure 10 shows this share has increased since 2007.
Figure 10. Distribution of hourly pay for employees aged 18+ in the cleaning sector. 2007-08
[pic]
Source: LPC (2009: figure 3.6).
Figure 10 also reveals a considerable erosion in pay differentials with an apparent bunching of employees at the £6.00 pay rate. In its evidence to the LPC, the employer body, the Cleaning and Support Services Association reported that an effective ‘wage ceiling’ had been created for supervisory staff at £6.50 (LPC 2009: 78). Concerning the impact of the minimum wage on company performance, the LPC’s Survey of Employers for 2008 found that two thirds of companies perceived a drop in profits as a consequence of the 2007 increase in the minimum wage. Approximately 62% also reported having to increase prices in order to afford the new rate (op. cit.). However, companies experienced difficulties passing on the increased prices to client organisations (an experience confirmed by the fact that the increase in the sector price index was less than inflation during 2007-08) (op. cit.: 80).
Security
The security sector pays higher wages than the cleaning sector despite its comparable reliance on unqualified workers; the main difference is the over-representation of men rather than women. Rates of pay are significantly more distributed than other sectors reviewed above, with very few jobs paid at the minimum wage. Also, differentials between pay rates appear to have been maintained. Even during the relatively generous upratings of the minimum wage during 2004-06, median and lowest quartile pay rose by the same amount as the national minimum wage. Also, the differential between the lowest decile and the minimum wage increased (LPC 2007: 96). The trend of improved earnings in the sector is, according to the main employer body, the result of the introduction of a statutory licensing system, which has encouraged firms to embrace training, as well as a more professional approach to security activities (LPC 2007: 97). A further change is technological. Many employees have been replaced by surveillance technologies, leading to concerns over job losses in the mid-2000s, although employment increased during 2007-08.
Food Processing
Food processing is an important segment of the UK’s manufacturing sector, with 350,000 employees in December 2008. However, like the rest of manufacturing the number of jobs is declining. Employment fell by just over 14,000 between December 2006 and December 2008 (LPC 2009: table 3.2). Introduction of new technologies, as well as intensified competition, is part of the story (James and Lloyd 2008), and the recent acquisition of Cadbury’s by Kraft is expected to lead to thousands of job losses. A continuous pressure on the industry is imposed by the large food retailers. The UK has one of the most concentrated food retail sectors in the world and competition among the leading supermarket chains causes them to exert intense pressure on suppliers’ prices (and quality). Employment in the food processing sector is characterised by high turnover (estimated at 20-30% - James and Lloyd 2008) and poor working conditions. Also, there is high use of migrant workers and grave concerns over exploitation in the sector. It was the deaths of Chinese cockle-pickers in 2004 that led to the introduction of a Licensing Authority for gangmaster organisations – temporary work agencies operating in the food and agriculture industry.
Again, there is evidence of inability to maintain pay differentials in response to upratings of the minimum wage. In their evidence to the LPC, the Food and Drink Federation commented on the increasing difficulty to retain pay differentials as a result of increases in the NMW. They highlight the continuous pressure to maintain differentials arguing that many workers perceive a stigma attached to the term ‘minimum wage’ and this pressures employers to pay above the minimum in an effort to encourage staff motivation (LPC 2009: 87). While a relatively small proportion of employees are paid the minimum wage, earnings data show a reduction from 50p to 30p in the differential between lowest decile pay and the minimum wage during 2004-2006 (LPC 2007: 112).
Like other low paying sectors, it is a sector with very little unionisation and collective bargaining. In this context, as well as the increasing penetration of gangmaster organisations, James and Lloyd (2008: 240) argue for the importance of the national minimum wage (properly enforced) in providing a widely recognised wage floor. While their case studies show many workers are paid at or just above the minimum wage, continued use of shift premiums ensures many benefit from a positive differential.
Clothing
Clothing is one of the areas of manufacturing that has experienced very strong job losses over at least the last three decades. One third of jobs have been lost in the last ten years, with a 4% loss during December 2007-2008 (LPC 2009: 85). In the light of this decline, employers have been pushing for pay rises in the sector below the rate of inflation – that is, real wage reductions. Also significant is the evidence that the share of workers on piece-rate payment schemes whose pay had to be ‘made up’ so as to comply with the minimum wage increased to 28% by 2006 (LPC 2007: 116). Despite the job losses in this industry, throughout its ten years, the LPC has consistently argued that it is international competition and not upratings of the minimum wage that has been the cause.
7. Investigation of three sectors
In order to generate greater insights into the roles of social actors in shaping pay equity in a context of minimum wage developments, this project required the collection of primary data. The research design and method for data collection was agreed with the four other country teams undertaking this study. The fieldwork involved selected case studies of relevant pay agreements in three sectors that are strongly influenced by developments in the National Minimum Wage. Data collection involved interviews with social partner representatives from companies, employer associations, trade unions and industry trade bodies, as well as the sourcing of detailed information about changes in pay structures and pay agreements for the lowest paid.
A preliminary analysis of pay and conditions in eight low paying sectors (see above) provided the context from which three sectors were selected - business cleaning, security and retail. These three were chosen in order to focus our analysis on the minimum wage and industrial relations with respect to differential groups of workers: the security industry is dominated by male full-time workers, whereas the predominant worker group employed within the cleaning and retail industries is female part-timers. A further justification for the sector selection is that retail is the largest low paying sector in the UK, cleaning is the sector with the highest proportion of workers paid at the statutory minimum wage and the security industry appears unique in having been able to sustain pay differentials, possibly through greater possibilities for introducing new technologies.
Like the Spanish partner in this comparative study, the nature of UK industrial relations precludes a selection of sector-wide pay agreements. Instead we have identified large (possibly standard-setting) agreements in each sector that are negotiated at the level of a single organisation. In each case, the selected organisation is among the market leaders in the sector. In addition, we collected data from a range of sources in each sector in order to understand the wider issues surrounding the minimum wage and industrial relations.
The specific participants for our fieldwork were initially approached through contacts from Manchester Business School. In two sectors – retail and cleaning – the initial contact was with senior members of the pay negotiating team at the two relevant trade unions, Usdaw and Unison, respectively. The snowballing method provided useful follow-up contacts with lead pay negotiators in the private sector companies – RetailCo, CleanCo and ServiceCo. For the security sector, the initial contact was with a senior manager at the multinational company, SecurityCo, who passed us on to contacts from the HR team at the European, UK and divisional levels. We subsequently approached a senior pay negotiator at the trade union, GMB. Data were also collected from small-to-medium sized firms in the cleaning and security industries, as well as from representatives of trade bodies in these two industries, BICS and BSIA. In total, 15 interviews were conducted (table 9).
Interviews with participants lasted between 35 and 90 minutes. The interview schedule was emailed to participants prior to the face to face interview (or when a face to face meeting could not be arranged then a conference call) to allow them time to consider the topics and range of information that was required. Subsequently all interviews were transcribed verbatim.
Table 9. List of interviewees’ job positions and organisations
|Job position of interviewee |Organisation |
|Retail sector | | |
| - Research team leader |Trade union |Usdaw |
|- Senior pay negotiator | | |
| - Senior HR manager |Company |RetailCo |
|Cleaning sector | | |
| - Senior pay negotiator (NHS) |Trade union |Unison |
|- Senior pay negotiator (private sector contractors) | | |
| - Senior HR manager |Company |CleanCo |
| - Senior HR manager | |ServiceCo |
| - Chief accreditation officer |Trade body |British Institute of Cleaning Science|
| - Managing Director |Company |SMECleanCo |
|Security sector | | |
| - Senior pay negotiator |Trade union |GMB |
| - Senior HR manager (European region) |Company |SecurityCo |
| - Senior HR manager (UK) | | |
| - Senior HR manager (security services division) | | |
| - General manager |Trade body |British Security Industry Association|
| - Managing Director |Company |SMESecureCo |
Note: Highlighted organisations provided the key focus for the case study pay agreement.
In each sector, we gave special attention to the approach and strategy of trade unions towards pay equity and the challenge of how to build on developments in the NMW. The three unions are very different in their approach and in the challenges they face. A preliminary insight into their varying approaches can be drawn from their respective recommendations to the LPC, as summarised in table 10.
Table 10. Comparison of three trade unions’ recommendations to the LPC, 1999
|Trade union |Membership |Recommendations to the LPC for its October 2009 report |
| | |(actual rate subsequently set at £5.80): |
| | |i) Adult rate |ii) Age of |iii) Other recommendations |
| | | |adults | |
| | | | | |
| CWU |250,000 |£6.50 |16+ |NMW should be a ‘living wage’ |
| GMB |601,131 |£7.00 (but supports |16+ |All age differentials should be removed |
| | |TUC position) | | |
| PCS |300,000 |£8.25 |18+ |Apprentices should earn same as non-apprentices|
| | | | |of the same age. |
| Unison |1,434,000 |Calls for £7.45 by |18+ (and 16+ |Extend coverage to apprentices |
| | |Oct 2010 |‘over time’) |Increase budget for enforcement |
| | | | |Widen remit of Gangmasters Licensing Authority |
| | | | |to other sectors with high shares of migrant |
| | | | |workers |
| Unite |1,540,000 |£6.71 |18+ |Youth rate at 80% of adult rate. Rule out |
| | | | |indexation linked to productivity. |
| USDAW |384,000 |£6.00 |18+ |Full minimum wage at 18. |
| TUC |Peak association (59 |‘More than £6.10’ |21+ |Increases for youth rates that exceed average |
| |unions, 6.5 million | | |earnings growth |
| |members) | | |Introduce a new minimum for apprentices |
| | | | |Include seafarers under minimum wage |
| | | | |Proposals to improve enforcement |
Source: LPC (2009: 228-231) and documents accessed from relevant organisational websites relating to evidence submitted to LPC during 2008 in time for the 2009 LPC report. Own compilation.
8. Research findings
In the following presentation and analysis of findings, we explore five inter-related features of the approach to pay equity in each sector in the context of wider developments in the national minimum wage:
• union strategy towards low pay and pay equity
• evidence of constructive social dialogue about pay equity with employers and other actors such as trade bodies
• trends in the pay gap between the lowest jointly regulated pay rate and the statutory minimum wage
• opportunities for pay advancement/changes in pay differentials
• other pay practices
8.1. Business cleaning: an extended public sector pay agreement
A trade union strategy to improve the position of the lowest paid workers is central to our first and most complex case study, that of a public sector pay agreement extended to workers in the private sector who provide outsourced cleaning services to NHS hospitals. The National Minimum Wage has certainly played a positive role in bolstering the trade union’s approach by establishing a context of a rising wage floor, at least until 2007. But this case is not a straightforward picture of employer and union representatives negotiating a collective agreement in the context of a statutory wage floor. It involves supplementary forms of legal wage regulation, government codes of practice, wage-setting through independent pay review rather than collective bargaining and conflicts and tensions among several social actors, including the main trade union, Unison, the public sector clients (NHS hospital trusts), the government and the private sector contractors. Together, these institutions and actors have shaped the over-arching approach to pay equity. In the following we identify three key features to pay equity in the context of the NMW and the lowest paid:
i) Extending the coverage of a successful collective agreement
ii) Improving the gap with the NMW
iii) Bottom-weighted pay agreements
The first feature of a pay equity, or egalitarian, strategy concerns the extension of a pay agreement to all organisations - public, private and voluntary – that provide outsourced services to the NHS. The pay agreement itself is the NHS public sector pay agreement, which is the largest in the UK and covers all employees working in the NHS except doctors, dentists and some senior managers. Since 2004, it has taken the form of the ‘Agenda for Change’ pay agreement which was established both to harmonise terms and conditions across the many healthcare and ancillary services occupations and to provide workers with better pay and promotion prospects. Many trade unions are signatories to the agreement but Unison is the largest, claiming more than 400,000 members in healthcare, and has the highest representation of low wage workers in the sector.
What is significant for our purposes is that this public sector agreement has been effectively extended to all employers providing outsourced services to the NHS, the bulk of which are global private sector companies. As with any other situation of outsourcing with staff transfer, the terms and conditions of transferring staff (excluding pensions) are legally protected under TUPE regulations. But the level of protection goes much further in this case. A ‘Code of Practice on Workforce Matters’ (or ‘Two-Tier Code’) was negotiated by unions, employers and government and applied to NHS outsourcing contracts in 2005.[12] The agreement was a belated response to a long-running trade union campaign, with Unison at the lead:
We went to the government and said not only is it unfair but also severely destabilising that you have the employed staff of the NHS on Agenda for Change and outsourced workers who are doing essential work but are on minimum wage and in fact a few cases are being paid below the NMW (Union2).
The Code effectively extends the terms and conditions of the NHS pay agreement by requiring all contractors to ensure employees are offered conditions ‘which are, overall no less favourable than those of transferred employees’ (Cabinet Office, updated 2005: 1). Moreover, it requires the offer of a pension scheme ‘which is broadly comparable’ to the NHS scheme (op. cit.: 2). The Code is supplemented by a Joint Statement that is also signed by representatives of the private sector employers[13] and is further supported in practice by a toolkit, known as the ‘NHS staff passport’. The toolkit is hosted by the ‘Social Partnership Forum’, whose members include NHS employers, unions and government (see staffpassport).
Private sector contractors agreed to the extension of the pay agreement only with the additional investment of approximately £75 million by the government to cover additional labour costs incurred in new and ongoing outsourcing contracts. In the words of one of the Unison officials, the employers’ view was ‘let’s pay them decent wages and conditions as long as we don’t have to pay for it’ (Union2). With some of the large contractors, Unison has successfully negotiated a single pay agreement applicable to all outsourcing contracts with the NHS, replacing the contract-specific terms and conditions previously in place. However, their success is contingent on the company; one large UK-owned multinational contractor is singled out as ‘aggressively anti-union’ (Union2) and it refuses to endorse a single agreement. The two companies participating in our study were identified as supportive of Unison’s approach:
Some of the better ones like [CleanCo] and [ServiceCo] are committed to it [a national agreement] and would rather have a level playing field where people are paid these better wages with better conditions. And it helps them. It is self-interest as it reduces staff turnover and allows them to recruit more qualified staff which will give them a better service. … They don’t want [other named companies] coming in and undercutting them. They would rather they all came in with the same labour costs so that it’s fair bidding and what we are fighting for is efficiency (Union2).
There are no official data on extent of coverage of the pay agreement among outsourced services providers. Unison informally estimates around 20% of contractors are non-compliant. The problem, however, is not the private sector employer, according to Unison. Instead, it is the client organisation – the NHS Trust – that typically refuses to pay the higher terms and conditions, despite being able to claim the additional funds from central government (Unison1, Unison2).[14] In one recent case of outsourcing, Unison claimed it was the facilities manager from an NHS Trust who blocked the improved pay agreement, although a strike ballot eventually proved successful. In those outsourced contracts where the pay agreement has not been extended, cleaners (and other workers) receive multiple rates of pay for doing the same job, with a mix of TUPE protected pay rates from the Agenda for Change pay agreement - or even from the old Whitley Council NHS pay agreement - along with NMW rates to new recruits. The complication for Unison when organising a dispute is that they have to organise the ballot as a strike action against the employer – the private sector contractor – even though their complaint is with the client organisation, the NHS Trust.
Legally, if we are going to take any action then it has to be against the employers and not the Trusts. And the contractors understand this privately. And in one or two cases have actually connived with us to make the strike threat as they thought that would be what was needed to unblock the problems with the Trust (Unison2).
The second feature of pay equity in this case is the success in improving the gap between the lowest collectively bargained rate of pay and the NMW (table 11). When the NMW was first introduced in 1999 the gap between a newly recruited cleaner and the NMW was just 7%. In fact, this overstates the size of the gap since prior to 2005 the NHS pay agreement only applied to transferred staff (via TUPE). The data are limited but we know from several surveys that many cleaners recruited by private sector contractors would typically have been paid the NMW (Toynbee 2003, Unison 2002, Wills 2001). The signing of the new Agenda for Change pay agreement in 2004 established a huge jump in the gap for the lowest paid, up to 18%. Moreover, by 2005, this rate in principle applied to all workers employed by contractors providing outsourced services. The gap fell to 11% by 2007, as pay increases failed to keep pace with the uplifted NMW, but has more recently been restored to 18% once again as a result of a 3-year pay deal for 2008-2010.
Table 11. Evolution of gap between lowest pay for hospital ancillary workers and the NMW, 1999-2010
| |National NMW |NHS ancillary services pay1 | |
| | | |% Gap |
| |Adult rate |% annual change |Minimum rate |% annual change | |
|1999 |£3.60 |n.a. |£3.86 |n.a. |7.2% |
|2000 |£3.70 |2.8% |£4.01 |3.9% |8.4% |
|2001 |£4.10 |10.8% |£4.20 |4.7% |2.4% |
|2002 |£4.20 |2.4% |£4.47 |6.4% |6.4% |
|2003 |£4.50 |7.1% |£4.61 |3.1% |2.4% |
|2004 |£4.85 |7.8% |£5.71 |23.9% |17.7% |
|2005 |£5.05 |4.1% |£5.89 |3.2% |16.6% |
|2006 |£5.35 |5.9% |£6.04 |2.5% |12.9% |
|2007 |£5.52 |3.2% |£6.13 |1.5% |11.1% |
|2008 |£5.73 |3.8% |£6.42 |4.7% |12.0% |
|2009 |£5.80 |1.2% |£6.79 |5.8% |17.1% |
|2010 |£5.93 |2.2% |£7.00 |3.1% |18.0% |
Note: Pay data for NHS ancillary services refer to the Whitley Council agreement for ancillary services workers up to 2003 and the harmonised ‘Agenda for Change’ pay agreement from 2004.
The signing of the new harmonised pay agreement, Agenda for Change, in 2004 was clearly an important moment for pay equity. It registered a one-off annual rise in the lowest rate of pay from £4.61 to £5.71, some 24%. From the outset, Unison was determined that the new agreement ought to address low pay:
This was a very intensely negotiated agreement – arguably well thought out in terms of structure and it was robust in terms of tackling the issues and minimising the issues surrounding equal pay disparities … I think one of the biggest issues for us was the large jump for some of the lowest paid members (Union1).
The fact that the pay gap with the NMW has been restored to close to a 20% gap appears to be coincidental since representatives from Unison’s pay negotiating team claim not to aim for a particular pay gap with the NMW. Instead, their recommendations to the Pay Review Body focus on how inflation impacts their lowest paid members. They survey members’ basket of goods consumed and feed the pay and quantity information into the personal inflation online calculator provided by the Office for National Statistics (see .uk/pic/). Nevertheless, the context of the rising NMW has been important in shaping Unison’s approach and pay negotiators do monitor the gap between their lowest rate in the pay agreement and the NMW:
Clearly we look at what the increase [in the NMW] is and we look at what impact that will have on … our differentials. … If we saw over a period of time a reduction in the differential that we have then we would look at why that was and address it (Union1).
The third pay equity feature in this case is the use of bottom-weighted pay deals and elimination of the lowest pay grade (see table 12).
The old adage is that 1% of nothing is still nothing whereas 1% of 15,000 is more, and so on as you go up the scale. So the percentage increase makes a huge difference. … In most cases the employers have been sympathetic and wanting to address the low pay issue (Union1).
Since the new pay agreement was introduced in 2004, the first use of bottom-weighting was in 2007. This set a 2.5% pay rise for all staff above the 18th pay point in the 54 point scale, a more generous rise of £400 for the lowest paid (points 1-7) and 2.5% plus £38 for workers on pay points 8-18. For a newly hired cleaner on pay point 1 this translated as an effective 3.4% pay rise. Then, a three-year consolidated pay deal for 2008-2010 included two elements of bottom-weighting. First, the lowest pay point 1 was removed in 2009, translating as an effective pay rise of 5.7% for affected workers, more than twice the standard pay rise. Second, in 2010 a fixed payment of £420 was paid to workers on the lowest pay points 1-12, giving an effective pay rise of 3.2% compared to the standard 2.25%.
Table 12. Bottom-weighted pay deals for hospital workers, 2005-2010
| |Annual pay rise |Enhanced pay rise for lowest paid |Coverage of lowest paid |
|2005 |3.22% |-- |None |
|2006 |2.5% |-- |None |
|2007 |2.5% |-£400 (3.40% - 2.85%) |- Lowest pay points 1-7 (paid in two stages April and |
| | | |November) |
| | |-2.5%+£38 (2.76% - 2.69%) |- Pay points 8-18 (paid in two stages) |
|2008 |2.75% |-- |None |
|2009 |2.4% |5.7% |Lowest pay point 1 (eliminated) |
|2010 |2.25% |£420 (3.17% - 2.31%) |Lowest pay points 1-12 |
Source: NHS Employers ‘Pay Circular (AforC)’, various years, available from Aboutus/Publications/PayCirculars.
8.2. Security sector: multiple pay agreements in a single company
In this second case study, social dialogue has brought very mixed results in the approach to building on steady improvements in the statutory minimum wage. On the one hand, there is clear evidence of upskilling and uprating of pay for one segment of the workforce with full support from company representatives. On the other hand, for the majority of workers employed as security guards there is less evidence of pay improvements. The union has pursued an explicit strategy to improve pay, underpinned by a concerted drive to increase union membership. And, to some extent, the company is supportive of an ambition to reward more fairly what is perceived as undervalued work. However, the strategy has faced strong obstacles in a business context where each individual client exerts a strong influence on the employer’s ability to pay. Our analysis thus identifies the following different features to pay equity in this case:
i) uprating pay and upskilling jobs
ii) improving union membership
iii) establishing and growing a positive gap with the NMW
iv) bottom-weighted pay agreements
The joint regulation of pay at SecurityCo is complex. There are two company-wide collective agreements for the UK workforce, one for each of the two main business divisions - cash transit services and security services. Both agreements set minimum terms and conditions for a range of non-pay issues (holidays, sick pay, pensions, etc) but only the former agreement covers pay. For workers employed in security services there are multiple pay agreements, each negotiated at a contract level. The differentiation in pay regulation reflects two factors – unionisation and product market competition. Around 97% of workers in the cash transit division are unionised, compared to around 50% in the security services division; moreover, a major strike among cash transit workers in the early 2000s was followed by a new willingness among company managers to build a more constructive relationship with the trade union (Union3). Regarding the product market, while SecurityCo faces very strong competition in the volatile market for general security services it is one of only a handful of large operators providing cash transit services; moreover, the transportation of cash and valuable objects is perceived to be a critical component of UK infrastructure and therefore carries a high visibility (and reputational effects) of company HR practice.
Positive evidence of uprating pay and upskilling jobs and workers is most apparent in the cash transit division. Our interview data suggest a strong mutuality of interests among company managers and union officials in reaching a new agreement. At the time of the industrial relations disputes, staff turnover was high. The company therefore saw higher pay as a means to improve staff retention and recoup the relatively high investment costs in employee selection, training and uniforms. For the trade union, the challenge was to address the very low level of pay and absence of career pathways in the company. In 2005, following ‘a very long and very painful negotiation’ (Union3), GMB and SecurityCo reached a 5-year pay agreement that ‘changed the face of the industry’ (Union3). The union’s argument underpinning the deal was twofold. It argued for greater recognition of workers’ skills and for the need to compensate the high risk of the job:
The rates were so low for the quality of work that the employees were actually doing. The reality of the job that these guys do is that they go out in their vans and might get shot at. And that is the reality in the UK. … We were very much of the view that we need to make the job safer … and get these people on to a professional set of terms and conditions (Union3).
Staff turnover in the division has subsequently decreased, and the company’s investment in training, examinations, uniform and protective equipment – estimated at around £3000-3500 per employee - is therefore perceived to be justified. The new framework for social dialogue also has wider benefits for the company:
In terms of the success of the agreement in cash transit, the company has not been slow to recognise [this] and I think that it has been part of their strategy. … They certainly push it in terms of winning contracts and bidding for work, that they employ a quality workforce, on quality rates of pay, quality training, ongoing training, career pathways, stable industrial relations, mature relationship with the union. That is all part of their package. (Union3).
Alongside the pay deal, GMB has worked with SecurityCo (and other companies in the sector) to address crime in the security industry, described as ‘a showcase piece of work that both sides are proud of’ (Union3). Overall, both sides appreciate the results of social dialogue: ‘by working collaboratively with the employer and both sides really working together on this, it has meant it is a win-win both for the company and for the workers in that company’ (Union3). The outcome of the pay deal is presented in table 13. Over the 5-year period, the lowest collectively agreed hourly wage paid to SecurityCo cash transit workers increased from £7.57 to £10.20, an average annual rise of 6.2%. This compares with an increase in the national minimum wage from £5.05 to £5.93 over the same period, an average annual rise of just 3.3%. As a result, the gap between the statutory wage floor and the minimum earned by a cash transit worker has increased from 50% to 72% - a direct result of the union’s explicit strategy to widen the gap.
Table 13. Changing gap with the NMW: lowest collectively bargained pay rate at SecurityCo’s cash transit division
| |National NMW |SecurityCo - cash transit division | |
| | | |% Gap |
| |Adult rate |% annual change |Minimum rate |% annual change | |
|2005 |£5.05 |n.a. |£7.57 |n.a. |49.9% |
|2006 |£5.35 |5.9% |£8.25 |9% |54.2% |
|2007 |£5.52 |3.2% |£8.75 |6% |58.5% |
|2008 |£5.73 |3.8% |£9.62 |10% |67.9% |
|2009 |£5.80 |1.2% |£10.00 |4% |72.4% |
|2010 |£5.93 |2.2% |£10.20 |2% |72.0% |
The situation in the larger division of security services, which employs around 20,000 workers in the UK, is very different. Rates of pay vary across client contracts. In most large contracts, there is a joint pay agreement. Terms and conditions follow a single company-wide agreement, but pay differs substantially, reflecting the length of the client contract, the client’s willingness to recognise (and reward) the value of security services work and the competition with other providers. In the words of one of the managers:
Different clients have different needs and so these require different levels of skills and capabilities and those individuals expect to earn different wages … The industry has operated [like this] for the last 30 years so it’s like this is the way you breathe (SecurityCo2).
The difference with the market for cash transit services was spelled out by a representative from the security industry trade body:
This is where the [cash in transit] and guarding differ – the client has a limited choice, I think only about a maximum of 10 companies. Whereas with man-guarding you are talking about 1500 or 2000 companies. So with that choice it’s always going to be contract-led (SecurityCo1).
The result is that the same job could be paid the NMW (£5.80 in 2009-10) in one contract and up to £7.50 in another. In this ‘contract-led’ context, the union (and to a lesser extent the employer) deploys three complementary strategies to improve pay: increase the share of union members; establish a gap between the NMW and the lowest wage paid by SecurityCo; and negotiate bottom-weighted pay deals.
The GMB believes a more strongly unionised workforce is a necessary condition for addressing low pay in the security services division. Union membership in 2007 was only 20% and the union faced many obstacles to mobilising new members. The division employs more than 20,000 security guards distributed across some 5,000 sites. Many work alone and places of work are typically secure sites, which makes it very difficult for union officers to make physical contact. Then, as part of a new initiative, GMB representatives attended induction training sessions organised for new recruits. A 90% success rate in signing up new members increased the 20% union membership share to approximately 50% by 2010. This initiative depended on a parallel commitment to training a 25-strong ‘GMB At Work Team’ who were granted four days paid leave by SecurityCo to undertake union training in recruitment methods.
Building on the increased union membership, the union has sought to improve pay – in particular to establish a pay gap with the NMW and to grow this gap wherever possible. It has been assisted in this aim by a general disposition among SecurityCo managers in favour of improving the pay of what they perceive to be undervalued security services work.
It is part of our specific strategy when negotiating agreements. … We wouldn’t expect any of [SecurityCo’s] staff to be on the minimum wage, or indeed on any other minimum conditions, as a blue chip company. We have a clear strategy that they have a moral and professional obligation within the industry to drive standards up because if not [SecurityCo] then who? (Union3).
We have been working with our union to see how we can increase our pay rates for the employees in that division [security services], how we can get those [clients] buying security to see the value of it and get them to pay a reasonable amount of money for it (SecurityCo2).
However, the main obstacle to this principle is not so much SecurityCo as the client organisations that contract for security services. Clients exercise a great deal of authority in designing the contracts for security services and, because of the business model that SecurityCo operates in its UK operations (although not in other Northern European subsidiaries), each contract exerts a strong influence on the design of job roles and the setting of pay levels. Both the union and company interviewees emphasised the power of the client:
[SecurityCo] won’t want to upset their client at any cost. The customer comes first always, which is one of our big sore points’ (Union3).
It’s all contract led. We have no national pay negotiations because we can’t, because one client might give us a 2% pay increase and another client may give us a 10% pay increase so we can’t apply a 5% pay increase across the board as the contract that has only given us a 2% pay increase would be running at a loss (SecurityCo3).
Unlike the cash transit division of the company, contracts for security services are driven by intense competition; profit margins are tight and contract duration is short – typically 12 months for contracts valued under £1million and 12-24 months for higher value contracts. Each contract defines the units of security services provided (translated as an employee’s working hours) and SecurityCo carefully monitors the number of ‘red hours’, defined as those staff hours for which no revenue is earned. But the strong role of the client is an industry-wide issue. In the union’s view, ‘the industry needs to have a proper conversation about breaking the link between competitive pricing and pay. That is the argument that needs to be won’ (Union3). The GMB wants to establish a new minimum hourly rate for security services workers of £10. In turn, SecurityCo is supportive, but only if this is established industry-wide, ‘because if it is not across the industry then we would lose competitive advantage’ (SecurityCo2).
Because the client is able to exercise such a strong influence in the security services division, the union and the company have to devote resources to negotiate pay again and again across separate contracts. Because union resources are finite this means that many staff employed on the smaller contracts do not have a collective agreement for pay. Across the larger contracts, pay varies and the issues for negotiation vary. In general, the union seeks to establish a bargaining position that retains SecurityCo in view as the employer and thus ultimately responsible for pay, despite the obvious influence of the client.
If a banking client was let’s say giving a 0% pay award when they renewed the contract with SecurityCo due to the recession and then if SecurityCo were to come to us and say, ‘We’ve had no uplift in the contract’, then we’d say, ‘Quite frankly that’s your problem. That’s to do with where you are pitching in the market. And that’s a business decision that our members have no control over. We negotiate with you. You’ll have to put a hand in your pocket and take some out of your profit’. (Union3).
But different contracts present different puzzles for GMB and SecurityCo to resolve through social dialogue. A single contract with one of the leading UK banks, for example, included 47 different rates of pay for security services staff because the client had, over time, established different pricing arrangements in the contract as it added more sites. The union and SecurityCo agreed to reduce the number of rates (at present down to 20) and to establish a gap with the NMW. A new 5-year pay deal establishes a minimum rate of £6.50 in 2010, representing a 10% gap with the statutory minimum.
There are also examples of contracts where the client in fact pushes for a broadening and deepening of the job role of security services staff. One public sector client agreed a very long (relative to industry practice) 15-year contract and required a number of the contracted security workers on site to also develop building maintenance skills. Initially the client was prepared to agree a contract price that included an additional payment to such workers. Equally, SecurityCo was willing to make the additional investment in workers’ skills thanks to the stability of the contract. As the union interviewee put it: ‘The longer they have these contracts, then the more stable the worforce, the better the pay, the better the terms and conditions, the better quality training as they are also developing a broader and deeper relationship with their client’ (Union3). However, over the duration of the contract, each annual wage increase has not been applied to the additional payment, generating frustration among the newly skilled security workers, as well as suggestions from the union that SecurityCo has failed in its duty to negotiate an uplift with the public sector client.
A final feature of the approach to pay equity in this case is the practice of negotiating bottom-weighted pay deals where possible in order to establish a gap with the NMW. In a large contract with a banking client, SecurityCo agreed with GMB to award workers either a 2% pay rise or an uplift to newly agreed minimum rates of £6.20 (in 2009) and £6.50 (in 2010). For the many workers paid at the NMW in 2009 this represented a pay rise of 6.9%, and for workers paid £6.20 in 2009 the 2010 uplift represented a 4.8% increase. The gap with the NMW has therefore successively increased from 0% in 2008 to 6.9% in 2009 to 9.6% in 2010 (table 14).
Table 14. Changing gap with the NMW: lowest collectively bargained pay rate at SecurityCo security services banking client
| |National NMW |SecurityCo – banking client | |
| | | |% Gap |
| |Adult rate |% annual change |Minimum rate |% annual change | |
|2008 |£5.73 |n.a. |£5.73 |n.a. |0% |
|2009 |£5.80 |1.2% |£6.20 |6.9% |6.9% |
|2010 |£5.93 |2.2% |£6.50 |4.8% |9.6% |
8.3. Retail sector: a partnership approach in a leading supermarket chain
In our third case study, social dialogue through a high profile partnership agreement has explicitly built on the trend increase in the NMW to improve the position of the lowest paid workers. Key successes include a high rate of pay for young workers relative to the statutory minimum and a new environment of multi-skilling for low wage shopfloor workers. However, the bottom rate of pay in the collective agreement has moved considerably closer to the NMW over the last decade and, despite RetailCo’s increasing market share and profitability, there has been negligible improvement in pay relative to median earnings for the UK economy. Moreover, the company has won important concessions through the abolition of overtime premiums and reduction of unsocial hours premiums.
Analysis of interview data as well as trade union documents prepared for annual pay bargaining rounds with RetailCo suggest four key features to pay equity in this case:
i) improving the level of pay for young workers;
ii) sustaining a positive gap between the NMW and the bottom collectively agreed pay rate; and
iii) eliminating the lowest pay grades
iv) reducing overtime and unsocial hours pay enhancements
Usdaw has devoted considerable resources to highlighting the need for better pay for young workers in the retail sector. Its evidence to the LPC was instrumental in the case for introducing a new statutory youth minimum wage for 16-17 year olds in 2004. Moreover, in its recent submissions to the LPC it argues the relative level of the 16-17 year old statutory minimum ought to be 80% of the adult rate (Usdaw 2007, 2008a); the October 2010 statutory rates reveal an actual ratio of 61%. Usdaw is also collecting data through an online survey of members to press the case that the adult minimum rate ought to be extended to workers aged 18 years and over rather than 21 years old (see .uk/campaigns/ youngworkers/). In its collective bargaining agreements with RetailCo, Usdaw has sought to improve the pay rate for 16-17 year olds. It won an increase to 83.5% of the adult rate in 2004 and, after six years campaigning, eventually won harmonisation with the adult rate in 2010. In our interview in late 2009, the official made clear the union’s determination:
[At RetailCo] our strategy and policy is that the youth rate is always on our pay claim. And what we are hoping to do is complete that journey to effectively abolish youth rates in RetailCo in the coming years. … That seems sensible and reasonable given that many of the 16 and 17 year olds are doing entirely the same job as an adult worker. Our argument is always ‘You’re trained to do the job, you should be paid to do the job’ (Union4).
There is now a very large positive gap between the minimum rate earned by a young worker at RetailCo and the statutory minimum wage (table 15). RetailCo workers aged 16-17 years old have enjoyed a wage premium of more than 50% since 2004 when the 16-17 statutory minimum for this age group was introduced. Now that these workers are entitled to RetailCo’s adult wage, the premium over the statutory minimum is 87%. Also, because workers aged 18 and over are treated as adults at RetailCo, they also enjoy a large pay premium over the statutory minimum wage for this age group – between 35-38% in recent years.
Table 15. Youth pay at RetailCo1 and the gap with statutory national minimum wages, 1999-2010
| |Employees aged 16-17 |Employees aged 18-21 |
| |NMW |RetailCo minimum pay|% Gap |NMW |RetailCo minimum pay|% Gap |
|1999 |-- | |-- |£3.00 |£4.44 |+48% |
|2000 |-- | |-- |£3.20 |£4.58 |+43% |
|2001 |-- | |-- |£3.50 |£4.95 |+41% |
|2002 |-- | |-- |£3.60 |£5.16 |+43% |
|2003 |-- | |-- |£3.80 |£5.32 |+40% |
|2004 |£3.00 |£4.67 |+56% |£4.10 |£5.56 |+36% |
|2005 |£3.00 |£4.88 |+63% |£4.25 |£5.84 |+37% |
|2006 |£3.30 |£5.02 |+52% |£4.45 |£6.02 |+35% |
|2007 |£3.40 |£5.23 |+54% |£4.60 |£6.26 |+36% |
|2008 |£3.53 |£5.42 |+54% |£4.77 |£6.50 |+36% |
|2009 |£3.57 |£5.56 |+56% |£4.83 |£6.66 |+38% |
|2010 |£3.64 |£6.812 |+87% |£4.92 |£6.81 |+38% |
Note: 1. Collectively bargained pay rates applicable from July each year; the NMW applies from October each year (except April in 1999). Pay rates refer to established rates paid to employees with at least 12 months experience. Location allowance excluded. 2. In 2010, RetailCo abolished the 16-17 youth rae.
Source: Usdaw documentation and IDS Pay Reports, various years.
With regard to the second feature of pay equity in this case, social dialogue has contributed to maintaining a positive gap between the NMW and the minimum collectively agreed pay rate. However, the gap has shrunk considerably over the last decade. This result needs to be interpreted in light of the social partners’ overall outlook on low pay. Compared to the other large trade unions in the UK, Usdaw recommended the lowest rate for the NMW in its written submission to the 2009 LPC Report (see table 10 above). The senior official we interviewed defended the union’s ‘pragmatic’ approach and emphasised the need to maintain credibility through consensus:
Whatever we pitch this at [ie the new rate], it does need to appeal to a number of different groups – employers, government, the people that we represent. And so I think our strategy has always been not to just go picking figures out of the air because it looks good. So we have always taken a very sensible approach … It’s no good putting figures in that are just going to switch the employers or government off (Union4).
In its negotiations with retail companies, Usdaw applies a ‘deliberate policy’ to keep some distance between the NMW and the lowest rate in their pay agreements (Union5). In practice, however, Usdaw has had to sign several company agreements where the minimum rate is in fact the NMW (for example, with Argos, Somerfield and Woolworths – see Usdaw 2008b). The agreement with Retailco is in fact illustrative of one of the better pay deals for retail workers; as one of the Usdaw officials put it, Retailco is a high performing supermarket chain and therefore ‘does not want to be associated as a minimum wage employer’ and ‘wants to keep some clear water between the minimum wage and what it pays’ (Union4).
The pay data in table 16 demonstrate Usdaw has maintained a positive gap between the lowest RetailCo pay rate (for workers with more than 12 months experience) and the statutory adult minimum wage.[15] However, this gap has shrunk considerably over the 11-year period. The lowest paid workers at RetailCo earned 23/24%% more than the hourly adult minimum wage in 1999 and 2000, but this was nearly halved to 13% during 2006-08. In 2009 and 2010 the gap widened to 15% as a result of the very small increases in the statutory minimum wage in 2009. The 11-year trend decline in the gap is a concern to Usdaw and it has recently raised the issue in communications with staff (Usdaw 2008c: 11), as well as in presentations to RetailCo in preparation for the annual pay bargaining round (Union4). Of further concern, Figure 11 shows that this shrinking gap has occurred alongside stagnation in the level of minimum pay earned by RetailCo workers relative to the median wage for all employees in the UK economy. While the relative level of the statutory minimum increased by more than five percentage points, from 48% to 53% of the median wage, the minimum RetailCo rate of pay increased by less than two percentage points, from 59% to 61% of the median wage. At this very successful and profitable company, the minimum adult rate earned by employees remains more than five percentage points below the widely accepted low wage threshold of two thirds of the median for all employees.
Table 16. Gap between the lowest collectively bargained pay rate at RetailCo and the NMW
| | |Minimum RetailCo adult | |Details of collectively bargained pay rates: |
| | |pay | | |
| |Adult NMW | |% Gap |Grade A |Grade B |Grade C |
|1999 |£3.60 |£4.44 |23% |£4.44 |£4.64 |£4.87 |
|2000 |£3.70 |£4.58 |24% |£4.58 |£4.78 |£5.02 |
|2001 |£4.10 |£4.95 |21% |-- |£4.95 |£5.20 |
|2002 |£4.20 |£5.16 |23% |-- |£5.16 |£5.34 |
|2003 |£4.50 |£5.32 |18% |-- |£5.32 |£5.49 |
|2004 |£4.85 |£5.56 |15% |-- |£5.56 |£5.66 |
|2005 |£5.05 |£5.84 |16% |-- |-- |£5.84 |
|2006 |£5.35 |£6.02 |13% |-- |-- |£6.02 |
|2007 |£5.52 |£6.26 |13% |-- |-- |£6.26 |
|2008 |£5.73 |£6.50 |13% |-- |-- |£6.50 |
|2009 |£5.80 |£6.66 |15% |-- |-- |£6.66 |
|2010 |£5.93 |£6.81 |15% |-- |-- |£6.81 |
Note: Collectively bargained pay rates applicable from July each year and the NMW from October each year (except April in 1999). Pay rates refer to established rates paid to employees with at least 12 months experience. Since 2006 these are 5% higher than starter rates (see table 3).
Source: Usdaw documentation and IDS Pay Reports, various years.
Figure 11. RetailCo minimum pay and the NMW as a percentage of median hourly pay for all employees in the economy, 1999-2009
[pic]
Source: RetailCo pay rates from table 16 and median hourly pay for all employees from the Annual Survey of Hours and Earnings (gross hourly pay excluding overtime).
The third feature to pay equity in this case, that of eliminating the lowest pay grades, has meant that the shrinking pay gap with the statutory minimum wage has occurred alongside compression of the pay structure for RetailCo shopfloor workers. In 2001, Grade A was abolished and affected workers (mainly cleaners and trolley staff) were upgraded to Grade B (mainly shelf-fillers). Then in 2005, Grade B was abolished, following three years of bottom-weighted pay deals aimed to harmonise pay rates with Grade C (mainly check-out workers) (see table 16). At the time, 45% of the company’s retail workforce were paid Grade B rates so this represented a significant improvement for its lowest paid workers. The change in pay structure was a direct result of the rising NMW; ‘We have used the minimum wage rates to drive that and those pay scales up in order to eradicate the lowest grade so that you are coming in at a much higher grade’ (Union4). For RetailCo managers, the changes were rationalised as contributing to its ‘one team’, multi-skilling approach (IDS Report, August 2002).
The decision to eliminate the former Grades A and B carries the obvious risk of alienating higher paid workers who traditionally enjoyed a differential in pay that reflected a perceived difference in the skill and nature of the job. For non-supervisory workers, there are no longer separate rates of pay for the jobs of cleaners and trolley hands, for shelf-fillers and for check-out workers. Both union officials recognised the tension, but defended the new single pay rate as an effective means to improving the position of the lowest paid.
Yes, that [harmonisation of pay] created a little bit of ‘Well, I think my role is more important because I am handling thousands of pounds’ … I believe all those roles contribute to actually making that store a success. What I think the employer did was put those kind of demarcations in around pay to make some seem more important but they were all equally as important (Union4).
Well, there was some compression with the B to C grades clearly. And there were some people, but not many to be fair, who thought they were more important than what a Grade B was before. … It doesn’t come up any more. It doesn’t come through the collective bargaining (Union5).
But two issues remain a source of tension in social dialogue between Usdaw and RetailCo. First, Usdaw argues Grade C workers ought to have the right to opt out of programmes for multi-skilling (largely designed to give workers employed to fill shelves the skills to work on the cash tills). RetailCo won the argument that all new recruits post-2005 are obliged to train to be multi-skilled and paid at the same rate of pay, Grade C. However, managers still worry that stores with low staff turnover have too many pre-2005 employees who refuse to be trained to work on the cash-tills (RetailCo1). Second, where staff have completed a programme of multi-skilling there is dispute over the need for some form of pay incentive, such as a pay bonus or the right to progress to the next pay grade. The union argues that employees skilled to undertake the separate roles of either shelf-filling or cash-tills ought to be paid Grade C and all those multi-skilled paid at a higher pay grade, Grade D.
The final pay equity issue concerns changes to pay premiums for working overtime and unsocial hours. The changes at RetailCo seem to be leading, not following, trends in the wider UK private sector labour market towards a reduction in such premiums. For example, despite its close partnership for social dialogue with RetailCo, Usdaw was unable to prevent the complete phasing out of the overtime premium. A premium of 50% of the basic hourly wage was in place prior to 2002, but this was replaced by a fixed sum of £2.25 in 2002 and then gradually reduced to nothing in 2005. Enhanced payments for night work have also been reduced. RetailCo is one of only two major supermarket chains that pays a fixed cash sum, regardless of pay grade. Also, it discriminates between the period 10pm-12am and 12am-6am with a less generous rate for the earlier period (£1.38 per hour and £2.05 per hour in 2010), contrary to industry practice. For an experienced worker on the bottom grade, the effective night premium for 10pm-6am is 27.6% in 2010, compared to premiums of 33% and 50% in other retail companies. Payments for Sunday and public holiday working have also been reduced. These hours were awarded a premium of 100% prior to 1999, but this was reduced to 50% for all workers joining the company after this date.
9. Discussion and conclusion
The three detailed case studies of pay agreements shed light on the interaction between the UK’s statutory minimum wage, pay bargaining and the nature of social dialogue in low paying sectors. Table 17 summarises the key results. The findings support the notion that a policy of a rising minimum wage can be complementary with pay bargaining strategies developed in the context of social dialogue around particular collective bargaining agreements. This was especially clear in the Unison case study where a rising minimum wage during 2003-7 underpinned the radical uprating of the bottom rate in the collective agreement and its extension to private sector contractors. In the Usdaw case, we saw some feedback from union strategy to minimum wage policy since it was in fact the union’s distinctive approach to youth and adult pay rates that influenced the Low Pay Commission’s decision to recommend a new minimum for 16-17 year old workers.
The effect of a rising minimum wage on the pay structure was examined through a focus on the ripple effect at the bottom of the pay scale. In each case, unions and employers used varying methods of pay bargaining that help explain some of the ripple effect at the bottom of the wage structure. Bottom-weighted pay deals were used in two cases (including lump sums for the lowest paid for example) and the elimination of bottom grades was also deployed in two cases. A quasi-sector wide approach was established in the Unison case study through successful union lobbying of government for a new Code that requires private sector contractors to comply with a public sector hospitals pay agreement. In the GMB case, the employer expressed support for a sector-wide wage floor but in its absence had not even implemented a company-wide agreement due ostensibly to client pressures for separate pay agreements reflecting the particular conditions of each contract.
The nature and effectiveness of the raft of pay bargaining strategies put into practice shaped the trend pay gap between the statutory minimum wage and the collectively agreed minimum rate. The cases provide examples of a widening gap, mixed success (because of different pay agreements for similarly jobs and worker skills) and a narrowing gap.
Table 17. Summary of pay equity issues in the three case studies
| |Unison - Business cleaning |GMB - Security |Usdaw - Retail |
|Pay equity issues: | | | |
|1. MW complements union low pay strategy?|Clear, well developed strategy |Clear focus, building on |Main focus on youth rather than|
| | |experience in other company |adult workers |
| | |divisions | |
|2. Examples of pay bargaining strategies?|Bottom-weighted pay deals – lump |Range of approaches reflects |Elimination of 2 bottom pay |
| |sums for lowest paid |different divisions and clients|grades |
| |Elimination of bottom grades |of SecurityCo: one positive | |
| |Sector-wide approach – extension |example of uprating bottom | |
| |of public sector pay agreement |rates; one example of | |
| | |bottom-weighting | |
| | |Employer supportive of | |
| | |industry-wide minimum, but | |
| | |clients exercise influence | |
|3. Resulting gap with the MW? |Successful improvement |Mixed success due to fragmented|Narrowed |
| | |pay agreements with clients | |
|4. Improving union membership? |Already strong |Key focus for underpinning low |Key focus |
| | |pay strategy | |
|5. Other payment issues |-- |-- |Reduction of unsocial hours |
| | | |premiums and abolition of |
| | | |overtime premium |
Our study is clearly not representative of general trends in the UK. Most workers in the British private sector are only protected by the statutory wage floor and many in low paying sectors therefore do not enjoy the kind of pay scales typically negotiated in jointly regulated pay agreements. Nevertheless, our exploration of pay bargaining strategies may shed light on some conundrums in recent pay equity trends. One issue is that while an overall rise in the statutory minimum has improved the relative position of the lowest paid workers relative to the average worker, it has not changed the overall share of workers defined as ‘low wage’; this has remained stubbornly high at just over 20% since 1999. Our analysis highlights several possible factors. Certain types of bottom-weighted pay deals that benefit only the very lowest paid over other workers may overly compress pay differentials at the bottom and fail to lift workers above the low pay threshold. Also, the declining strength of trade unions means that their pay bargaining position is often weak compared to their social partner employer and, as we saw in one of our cases, this dampens the potential force of ripple effects from a rising minimum wage. A final issue that has implications of our assessment of the range of social actors involved in pay bargaining concerns the evidence of a strong role of client organisations in the cleaning and security sectors. The exceptional case of outsourced cleaning for the public health service demonstrates how an industry wage standard can function without upsetting competition. In other areas of the economy, the cost-cutting focus of client businesses frustrates employer and union efforts to improve pay and skills, holding back efforts to build upon the improvements in the minimum wage
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[1] Prepared for the research project ‘Minimum wage systems and changing industrial relations in Europe’ VS/2009/0159 (EWERC, University of Manchester) for the European Commission, DG Employment, Social Affairs and Equal Opportunities.
[2] One notable exception to unions’ opposition to statutory wage regulation was NUPE, the National Union of Public Employees. Many of its members were low paid and it campaigned during the 1970s and 1980s for a political solution in the form of a statutory national minimum wage (Blackburn 1988: 131).
[3] The 1986 Wages Act removed workers under 21 years from their coverage, limited wage setting to one basic minimum and one premium rate, required Councils to consider the impact on jobs when recommending the rate and simplified the procedure for abolishing Councils (Kessler and Bayliss 1998).
[4] For example, in one response the CBI stated that:
‘Although some members favoured the abolition of wages councils, the overwhelming majority preferred a substantial package of reforms. They accepted that wage council industries enjoyed good industrial relations...They also accepted that wage councils had a role in preventing the competitive undercutting of labour and some companies-especially the smaller ones--benefited from multi-employer bargaining’
And the Institute of Personnel Management argued:
‘The Institute supports the retention of minimum wage fixing machinery in the United m Kingdom...The Institute strongly opposes the singling out of wages councils for attack’
(cited in Callaghan and Jones 1988: 24).
[5] The wages order for 2009 includes a scale of minimum wage rates differentiated by age, experience, qualification and responsibility - £5.81 to £8.64. It also includes minimum rates for overtime work – a premium of 50% (see .uk/foodfarm/farmmanage/working/agwages/awb/pdf/awo-2009-guide.pdf, accessed 23/01/10).
[6] Present members of the LPC are from the employer bodies CBI, Gala Coral Group and , the trade unions Unison, Usdaw and TUC and the academics are Machin and Elliott. The chair is a former executive manager at Marks and Spencer.
[7] (accessed 22 January 2010).
[8] The initial £3.60 adult rate was recommended on the basis that it covered 2 million workers. However, subsequent re-estimations show that only 1.2 workers benefited (LPC 2003).
[9] In the UK, the GDP fell throughout six successive quarters from the second quarter of 2008 to the third quarter of 2009.
[10] See .uk/newsroom/tuc-16424-f0.cfm (accessed 24/01/10).
[11] See the Department for Business Innovation and Skills at: .uk/whatwedo/employment/trade-union-rights/tupe/page16289.html [accessed 4 October 2009] to download the regulations, which were revised in 2006.
[12] Agreed as part of the Warwick agreement in 2003, this code initially applied to local government contracting and in 2005 was extended to the NHS.
[13] The signatories to the Joint Statement are the Department of Health, four unions - Unison, GMB, Amicus and TGWU, the NHS Employers body and two private sector employer bodies – the CBI and BSA.
[14] In the words of one of the Unison officials, ‘It’s a requirement that the [NHS] Trusts deal with the contracts and then trigger the implementation process from there. … And that’s the problem because some of the Trusts … say ‘No, we don’t need to implement Agenda for Change rates, we don’t see the need for it’ (Union2).
[15] The following discussion refers to the main collective agreement with RetailCo. A separate agreement covers workers employed in the small ‘express’ stores (a fast-growing business segment). At these stores, all non-supervisory workers are paid the same basic hourly rate, which is around 5% less than the current Grade C rate, and also earn a store-wide bonus up to 20% of their salary awarded each month.
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