Not Just For The Good Times

Not Just For TheGood TimesThe New Imperative for Fair Pay

F A I R P L A Y – F A I R P A Y


Suite 11 Tulip House, 70Borough High Street,London SE1 1XFwww.fairpaynetwork.org

Director – MMaarrkk DDoonnnnee

Campaigns Officer – MMaatttthheeww PPeennnnyyccooookk

STEERING COMMITTEE

Chair – KKaarreenn BBuucckk MMPP

Treasurer – KKaattee GGrreeeenn (Chief Executive, Child Poverty Action Group)

AAmmaa UUzzoowwuurruu (Vice-President Welfare, NUS)

AAnnttoonniiaa Bance (Policy and Communications Manager, UK Poverty Programme, Oxfam)

KKaattee BBeellll (Director of Policy, Gingerbread)

MMaatttthheeww BBoollttoonn (London Citizens)

SStteepphheenn BBuurrkkee (Chief Executive, Counsel and Care)

DDoonn FFllyynnnn (Director, Migrants Rights Network)

JJuulliiee GGiibbssoonn (UK Coalition Against Poverty)

CCaatthheerriinnee HHoowwaarrtthh (Director, Fair Pensions)

DDrr.. PPeetteerr KKeennwwaayy (Director, New Policy Institute)

PPaauulliinnee DDooyyllee && JJoohhnn CCrryyeerr (Unite the Union)

DDeebboorraahh LLiittttmmaann (National Officer, UNISON)

JJeenn MMccCClleellllaanndd (Appletree Trust)

DDrr.. CCaatthheerriinnee RRaakkee (Director, Fawcett Society)

PPaauull SSeelllleerrss (Policy Officer, TUC)

PATRONS

SSiiaann BBeerrrryy

LLoorrdd BBeesstt

JJoonn CCrruuddddaass MMPP

BBaarroonneessss HHeelleennaa KKeennnneeddyy

GGuuyy SSttaallllaarrdd, Director of International Services, KPMG Europe

PPoollllyy TTooyynnbbeeee

Fair Pay Network

Contents

ppaaggee 33Not just for the good times

Forward: by Baroness Helena Kennedy QC

Chapter 1: Executive Summary

Chapter 2: Business case behind Fair Pay: KPMG

Chapter 3: Professor Keith Ewing: the Living Wage and EU Law

Coalition member contributions:

Chapter 5: TUC: Maintaining fair employment in recession

Chapter 6: Oxfam: Addressing National Minimum Wage violation and enforcement

Chapter 7: Unison: The impact of the economic crisis on low pay in the public sector

Chapter 8: Unite: Fair Pay Needs Teeth

Chapter 9: Child Poverty Action Group: Low pay and child poverty

Chapter 10: Gingerbread: Single parents, low pay and poverty

Chapter 11: Counsel and Care: Who cares? Low pay and the cost of caring

Chapter 12: National Union of Students: Creating a fair pay culture

Chapter 13: New Policy Institute: Fair Pay – what is positive about the recession

Chapter 14: Migrants Rights Network: Migrant workers in a period of recession

Chapter 15: Interviews

Pat MacFadden MP – Labour Party

Jonathan Djanogly MP – Conservative Party

John Thurso MP – Liberal Democrats

ppaaggee 44 Not just for the good times

The current recession could easily beappropriated to provide a smokescreenfor legislators and employers to freezethe wages of those in most need, who

have played no part in engendering theeconomic crisis that is hitting them and theirfamilies so badly. This would be beyond folly;it would be commercially dangerous andsocially short-sighted.

In many ways, the evidence that follows inthis publication is a direct challenge togovernment, political parties and electedrepresentatives of all colours and to allemployers not to let the severity of the currenteconomic crisis widen the scandal of low payin modern Britain.

As well as a rational appeal, this report alsoserves an empirical study into the problemof low pay and a constructive interventionon how best practice by employers andethical conduct by elected bodies makessound business sense. The 14 nationalorganisations that form the fair pay network– who collectively represent millions ofmembers and affiliates nationwide – haveconsulted their policy teams, researchers andtalked directly to those within their sphereof influence who are most negativelyimpacted by low pay.

It is instructive to note the exclusiveinterviews with the front benchrepresentatives of each major political partywith the remit for fair pay. Now more thanever it is vitally important for the electorate tobe clear on what our elected leaders plan to doto help those most vulnerable in our labourmarket. At the next general election it isincumbent on all political parties to offerclear, coherent manifesto solutions to the issueof low pay within the overall povertyequation.

But perhaps the most important section ofwhat follows is the business case provided byKPMG. Once again, a tested, evidenced andconsistent premise for the desirability andsustainability of ethical, fair pay policies ispresented, in this instance by a successful

commercial monolith that employs over136,500 people, spanning over 140 countries.There are vital lessons here for Britishemployers; hackneyed knee jerk rejections offair pay policies are not just unsubstantiated,they are irrational.

Wider evidence also consolidates thesuggestion that to increase the wages of thelowest paid at this time would actuallygalvanise local economies, as it would placeexpendable income directly in the hands ofemployees who for the large part would spendsalaries locally, bolstering local economies. Inparticular, where living wage implementationsurveys have been conducted, this has provedemphatically to be the case.

From the urgent necessity to increase,protect and make more robust the apparatusof enforcement around the NationalMinimum Wage to the growingdevelopment of living wage policies –especially within negotiated procurementcontracts - the challenge for government andlocal authorities is crystal clear. Foremployers, an opportunity is presented toinvigorate their businesses, invest in theirpeople, and improve their overall outputand quality of service delivery. This is thenew imperative for fair pay. ■

ForewordBaroness Helena Kennedy QC


Fair pay policies are not just for thegood times. In fact the opposite is thecase. Fairness must be reinforced ratherthan discarded during challenging

economic circumstances. The necessity of fairpay during this recession stems not only fromthe need to protect those most at risk in thedownturn but also from the need to ensurethat we emerge from this crisis in the directionof a more successful and sustainable economicmodel and labour market. A model groundedin the principle that working people have aright to remain free from the blight of povertyand where adequate pay levels play their partin helping us move away from an economybuilt on the hazardous sands of unsustainablepersonal debt.

Progress towards such a model is now moreperilous than ever. The tentative steps madeover the last decade towards a fair payemployment culture are threatened by theunprecedented crisis in the financial systemand the economic recession which hasfollowed in its wake. In addition to a moregeneral swelling of the ranks of theunemployed and low-paid workforce thedownturn could also endanger the limitedprotection afforded by the NationalMinimum Wage (NMW) and the validity ofpioneering fair pay best practice initiativesaround the country.

Given the scale of the economic downturn wenow face there is a clear and present dangerthat employers will be tempted to applydownward pressure on wages and retain orrevert to low cost, low value, low skill businessmodels. Public authorities may be tempted touse the recession as a smokescreen for drivingdown pay. In some cases irresponsible

employers may even be tempted to flout theNMW and clandestinely drive wages downbelow the legal minimum. The potentialsocial and economic costs of reflex reactionsalong one or any one of these lines cannot beunderestimated. Not only will widespreadwage decreases tear at the social fabric of ourcommunities by impoverishing andmarginalising large numbers of workingfamilies they will compound falling consumerspending at a time when aggregate demand inour economy must be sustained.

Therefore, as appealing as it may now seem tomany we must resist the temptation to scrambletowards the comfort zone of traditionaleconomic and labour market orthodoxy. It mayseem paradoxical but as National Union ofStudents Vice President (Welfare) AmaUzowuru rightly argues in chapter 10 ‘…now isprecisely the right time to tackle the culture ofvulnerable and low-paid employment, and toput the economy on a surer footing.’

Now, more than ever, we need action tomaintain the effectiveness of the NMW bymaintaining its ‘bite’1 and taking actionagainst rogue employers by ensuringcompliance and enforcement are adequatelycoordinated, funded, and resourced. Onlythen can we be sure that the legal wage-floorsanctioned in the NMW is watertight.

Now, more than ever, we must make theGovernment recognise, as Deborah Littmanargues in chapter 7, that cutting public servicejobs, pay, and investment will only make thedownturn worse. Only then can we ensurethat public services continue to properlyprotect individuals, families and communitiesfrom the worst effects of the downturn and

Executive SummaryMatthew Pennycook

help public service workers play their part inmaintaining demand in the economy.

Now more than ever, we must amplify thecase for pioneering best practice living wagemodels by publicising and sharing theexperience of successful organisations thathave adopted them, considering new businessmodels, and thinking of innovative ways toavoid economic pressures translating intowage reductions at the bottom end. Onlythen can we gain the necessary knowledge andexperience that will equip us to move towardsa sustainable fair pay culture.

All the above are essential if we are to continueto move towards a Britain in which levels oflow-paid work in the labour market aredrastically reduced, where low pay is transitory,and where pay ensures that working people andtheir families remain free from poverty.

We must therefore remake, restate, andamplify the case against the social injusticethat is low pay. We must ensure that low-paidworkers are afforded all the security possiblein these challenging times and utilise thespace provided by challenging circumstancesto rethink the damaging labour market modelwhich has dominated our economy for thelast three decades. As New Policy InstituteDirector Peter Kenway argues in chapter 11,‘‘Unfair’ pay, whether in the public or privatesector, is not part of the solution.’

Below we restate the case against the socialinjustice of low pay in the context of therecession and set out recommendations forensuring we can emerge from the economicdownturn with a fairer, more sustainable, andmore socially just economy and society.




Ensure the National MinimumWage continues to rise

The Low Pay Commission and theGovernment must resist calls to hold downany potential uprating of the NMW. TheGovernment must ensure that the NMWcontinues to increase over time in real terms.Holding down any increase in the NMW thisyear would not only harm those individualsand families worst affected by the economicdownturn but would remove a central plankupon which economic recovery depends: thesubstantial and immediate economic stimulusthat would be gained if low-paid workers feelthey have sufficient income to spend in theirlocal economy. It is notable that even duringthe recession of the early 1990s, despite theabsence of any legal wage floor, average paycontinued to rise in real terms – there is noreason to treat pay at the bottom end of thelabour market any differently in currentcircumstances.

Provide 21 Year Olds with theadult National Minimum Wage rate

We recommend – as the Low Pay Commissiondid in their 2008 National Minimum Wagereport – that 21 year olds should be entitled tothe adult rate of the NMW. Our ultimate aimis to see all age differentials in the minimumwage abolished. Younger workers should notbe paid less simply because of their age andirrespective of their capabilities orresponsibilities. Employers do not need to waitfor the law to change, but should review theirpay policies now in order to ensure thatyounger workers are treated fairly.

Strengthen National MinimumWage Compliance andEnforcement measures

The Government has enacted a number ofproposals to make NMW compliance andenforcement meaningful. Where these havebeen effective we welcome them. However,our research suggests that significant gapsremain in the floor ostensibly provided by theNMW and that the measures introduced bythe Government to remedy instances ofNMW law infringement may not befunctioning effectively (see below). On thisbasis we recommend:

■ An increase in the number of staff in, andresources provided for, the NMWCompliance Unit across all regions of theUnited Kingdom.

■ The introduction of a clearer and simplersystem of employment rights to replace theexisting employment status regime. Thecurrent framework means that ‘employees’,‘workers’ and those who are ‘self-employed’ are entitled to different levels ofprotection at work. The complexity isconfusing for workers, unfair for thosewho lose out on employment rights, andeasy for rogue employers to exploit anddeny staff fair treatment.

■ Better coordination between enforcementagencies. Agencies such as theEmployment Agency StandardsInspectorate, the Gangmasters’ LicensingAuthority and the Health and SafetyExecutive all encounter minimum wageviolations but have no enforcement powersof their own and no guarantee that HMRevenue and Customs (HMRC) willpursue cases reported by them. Werecommend that the Government buildson the Fair Employment EnforcementBoard by taking further steps to coordinatethe work of these agencies with HMRC,removes all institutional and legal barriersto joint case management, and providesthe enforcement regime as a whole withthe additional resources required tobecome more proactive. Work should bedone to strengthen the role of TradeUnion’s and other stakeholders such ascommunity groups in the employmentrights enforcement and intelligencegathering process.

■ The introduction of a governmentsubsidised fund to enable workers whohave been underpaid or not paid theNMW and who have fought and wonwage arrears claims to receive immediatepayment to help them stave off financialcollapse. With the Government taking onthe role of intermediary in this wayabused workers are guaranteed that thewages they are owed will be repaidimmediately and rogue employers can bepursued for repayments by the fullresources available to the Government.While most of the estimated £29 million

Key Recommendations

identified by the Government as beingowed to employees who were underpaidor not paid the minimum wage under theNational Minimum Wage Regulations1999 has been repaid, our researchsuggests that the exact proportion is notaccurately known by the Government.2 Inaddition to the introduction of aGovernment subsidized fund we thereforeurge the Government to take immediateaction to trace the precise levels ofrepayment to employees who havesuffered minimum wage underpayment.

Tackle Low Pay in the Public Sector

We call on the government to root out lowpay in the public sector – in whichapproximately a quarter of all low-paid jobsreside – in order to guarantee fairness and aideconomic recovery by boosting demand. Inthe Public Sector Government (local, centraland across the devolved administrations) isactively allowing the culture of low pay tocontinue, whilst subsidising it through the taxcredit system. We urge leadership to root outlow pay in the public sector and show allemployers the responsibilities they have to paya decent wage.

Sustain and Encourage Fair PayBest Practice

We strongly recommend that theGovernment encourages and supports livingwage initiatives – in the public and privatesectors – during the downturn and beyond.The experiences of Living Wage and Fair Payemployers across the country shows thatliving wages not only make moral sense butbring obvious economic benefits toemployers by cutting staff turnover andboosting productivity. Furthermore,increasing pay levels where appropriate isanother means of stimulating demandduring the recession. By encouraging andsupporting those employers who canincorporate fair pay or living wage initiativesinto their business models and taking a clearstand against knee-jerk wage cuts theGovernment can aid economic recovery andlay the foundations for the spread of a moreequitable, fair, and sustainable model ofbusiness and economic growth.


Low payThe case against low pay3 is clear, unequivocaland familiar to many. What Chief Executiveof Counsel and Care, Stephen Burke describesin chapter 9 as ‘the problems of endemic andenduring low pay’ effect approximately 5.3million people – over a fifth of all employeesin this country.4 For this reason since 1997the Labour Government has sought toameliorate some of the worst affects of low-paid work for those individuals who receive it.Yet while the National Minimum Wage, basicholiday entitlements, the Working TimeDirective, and the use of public funds tosubsidise low-paying job sectors through theuse of tax credits has benefited millions theyhave not reversed the trends which began inthe late 1970s towards a labour marketdefined by a high-incidence of low-paid work.

Levels of low pay, taking the commonly useddefinition, have therefore remainedunchanged in the last decade and remainextremely high. International comparisonssuggest that its incidence in the UnitedKingdom is still one of the highest inEurope.5 In 2005 an estimated 22.1 percentor 1 in 5 employees in Britain fell below thelow-pay threshold. This compares to 17.6percent in the Netherlands in 20056, 12.7percent in France in 20027, and 8.5 percentin Denmark in 2005.8

The UK labour market remains one definedby its high proportion of low-wage workers,buoyant job growth in most low-wageindustries (such as hairdressing, social care,retail, hotels and restaurants, and security),relatively weak employment protection, a lowand declining ratio of unemployment benefitsto earnings, high wage inequality with a largepenalty for working in low-status jobs,relatively low union density, meaning thatmany workers do not receive protectionthrough collective bargaining, and a culture ofhouseholds working long hours combinedwith a high level of work effort.9

A labour market of this kind not only stymieseconomic performance – low pay is associatedwith low value-added employment and lowproductivity – but compounds a variety ofsocial injustices by contributing to persistentlyhigh levels of relative poverty and inequality.For this reason low pay is a social injustice inits own right and its reduction a crucial stepin building a fairer society. Low paysubstantially increases the chance of findingoneself in ‘working poverty.’10 This is why lessthan a fifth of low-paid adults (19 per cent)earned enough to lift their household out of

poverty through their wages alone, comparedto more than three-quarters of non-low-paidworkers11 and 57 per cent of households andnearly half of the three million children livingbelow the poverty line have at least one personat work in their household.12 As Paul Dornanfrom Child Poverty Action Group argues inchapter 7, ‘Starting a job is not a safe routeout of poverty: in one in three cases movinginto employment from out of work povertysimply shifts a family into in-work poverty.’

The case is irrefutable: poverty and low payare entwined over the life course individualsand across generations.13 While analysis andstatistics flow endlessly from our pens thereality for many of our fellow citizens living ina low-wage households is going withoutmeals, clothing, holidays, educationalopportunities, heating, healthcare andmedicine, and basic leisure activities that therest of us take for granted. Yet while therelationship between poverty and low pay haslong been recognised, action to tackle thoseincidence levels has been limited.

This is not due to any insurmountablebarriers but is the product of an absence ofpolitical will. Even a cursory glance at theabove levels of low-paid work in otherWestern labour market’s prove that the highincidence of low-paid work in the UnitedKingdom is not the inevitable product of afunctioning market economy, technology,efficient organisation, or the pressures facedby states in a globalised world. Rather it is theoutcome of a complex mix of policy choicesand the social and institutional contextspecific to the United Kingdom. As a resultlarge numbers of low-paid workers in Britainare not a predetermined fact. We can, throughwhat policy choices we make, significantlyaffect that most fundamental of economicchoices – the division of gains and losses inour economy and labour market.

Despite its commendable record on pay andemployment rights the government has notbuilt upon its success by developing anexplicit agenda to tackle low pay. Yet paidwork is a core element of the government’santi-poverty strategy and its aim to halve childpoverty by 2010 and to eradicate it by 2020.The fundamental assumption of currentgovernment policy that paid work is the‘single most effective means of avoidingpoverty, both now and in the future’14 hasunderpinned efforts to increase employmentrates, to make work possible for individualswho have traditionally existed outside thelabour market, and to ‘make work pay’relative to out-of-work benefits. However,while work may be the surest route out ofpoverty, it is far from an inevitable one.15

Therefore in addition to the essential focus onskills the government must actively encourageand support a move away from a labourmarket defined by a high incidence of low-paid work towards one defined by a higherproportion of adequately paid jobs where fairpay best practice is widely celebrated. DirectGovernment action can lead the way. As KateBell from Gingerbread argues in Chapter 8,‘We can and must do more and Governmentcan start by setting an example and tacklinglow pay across the public sector, insisting thatcompanies from whom it procures contractspay a living wage.’

Low-paid work and the recessionIn addition to the probable rise in theproportion of low-paid jobs in the Britisheconomy the economic recession we are nowentering is likely to have two specificconsequences for low pay. Both must beguarded against if we are to maintainfairness for low-paid workers in thedownturn, ensure the recession is as brief aspossible, and establish the foundations for amore sustainable and equitable labourmarket and economy.

National Minimum Wageinfringement and the exploitationof vulnerable workers

For the last nine years the national minimumwage has lifted pay at the bottom of the wageladder without – despite widespreadpredictions – impacting on levels ofunemployment. As a result, while it has notserved to alter the high proportion of low-


…we must resist thetemptation to scrambletowards the comfort zone oftraditional economic andlabour market orthodoxy.

paid jobs in our economy it has helped keepincome inequality in check and has narrowedthe gender gap amongst the lowest paid.16

The success of the minimum wage and the‘bite’ it provides in relation to median hourlypay may be placed in danger if the Low PayCommission decides, following itsdeliberations, to freeze or restrain any increasein the real term value of the NMW for theperiod October 2009 - October 2010 as theCBI and others are calling for. Not onlywould such a blunt reactiondisproportionately harm low-paid workers butit would paradoxically jeopardise the health ofour economy by depressing consumerdemand – a mistake the new Obamaadministration in the US has been determinedto avoid. It is therefore imperative that the‘bite’ of the NMW is sustained by continuedincreases over time in real terms. As RichardExcell, Paul Sellers and Nicola Smith from theTUC argue in chapter 5, ‘…A fairness agendameans a commitment to continuing cost-of-living pay increases for low-paid workers,’ anincrease which ‘would generate a substantialeconomic stimulus.’

However, the effectiveness of the NMW isalso at risk from disreputable employers whomight be tempted in recessionarycircumstances to drive down wages below thelegal floor and flout employment protections.Migrant workers are especially vulnerableand, as Don Flynn, Director of MigrantsRights Network puts it in chapter 14, theirsurvival strategy during the recession is likelyto involve a forced acceptance of ‘downwardpressure on wages and conditions and hence arise in remuneration at below fair pay levels.’For vulnerable migrant and indigenousworkers exploited by such employers – whosepositions are insecure and who are often noteven aware of the rights they are legallyaccorded – the result is often a wage farbelow that of the legally mandated nationalminimum. As has been well documentedrogue employers bypass NMW provisionsthrough a variety of surreptitious techniquesincluding mandated uniform and transportcosts, denial of maternity or paternity leave, non-payment for sickness or holiday entitlement, and the use of bogusself-employment status to circumvent legal protections.17

Prior to the introduction of the currentGovernment’s employment protectionmeasures such practices were completelywithin the letter of the law. In that respect theNMW along with the Gangmasters(Licensing) Act 2004 and other regulation has

done much to stem the tide of abuse byproviding legal standards below whichindividual workers should not fall. However,the success of the NMW and otheremployment rights depends almost entirelyupon their enforcement. In this respect theireffectiveness is often found wanting.

The government has recognised the problem,increasing the budget for minimum wageenforcement to £9 million a year in the 2006pre-budget report while government ministerscontinually affirm the need for strongerenforcement. New measures to come intoforce in April 2009 require rogue employersto make up wage arrears if they pay below theminimum wage and faced with a possible fineof up to 50 per cent of the totalunderpayment.18 This is a good start but thedeterrent value in such measures for thosecontinually infringing the law is stillinadequate. In any case, penalties aremeaningless if rogue employers cannot beidentified and apprehended. The lack ofresources accorded to regional enforcementteams and Customer Response OutreachWorkers (CROW) makes this a task difficult.Evidence shows only 125 compliance teamstaff in the entire United Kingdom19 and thegovernment minister responsible has statedthat ‘there are no plans to increase thecapacity of this team as current demand isbeing met.’20 According to a study producedin 2006 a typical employer will only getinspected once every 330 years.21

The economic downturn will only serve toincrease the incentives for these employers toflout national minimum wage legislation andcontravene employment rights. Someemployers may be tempted to alter staff termsand conditions, transfer employees to ‘worker’contracts, or falsely categorize workers as self-employed as a means of saving outgoings.

There is therefore a renewed urgency for extraresources to be given to enforcement agenciesto ensure potential rogue employers areproperly deterred from flouting the law in thedownturn. As Krisnah Poinasamy fromOxfam argues in chapter 4, ‘…enforcement ofthe national minimum wage requires urgentattention to ensure that employers do not cutcorners and force the most vulnerable workersinto poverty.’ The government must thereforerapidly roll out a far more rigorousenforcement agenda which would provide forbetter funding and coordination ofenforcement agencies and substantiallyincreased penalties for non-compliance withemployment rights through fines and negativepublicity. As Jack Dromey puts it in chapter



8, ‘enforcement without teeth, is little use tothe millions of vulnerable workers in modernday Britain.’

The threat to fair pay best practice

While the introduction of the NationalMinimum Wage has had a substantial impacton the wages of the lowest paid it is very farfrom a watertight means of avoiding workingpoverty. Recent research funded by the JosephRowntree Foundation shows that a singleperson with no dependents, living in councilhousing, needs £13, 400 a year before tax toafford a basic, but acceptable standard ofliving22 a figure well above the £11, 173.50 aminimum wage worker will earn per year.

For this reason the last decade has witnessedthe introduction of a number of diverseliving wage initiatives across the country.Grassroots initiatives were initially at theforefront with the establishment of livingwage pioneers TELCO (The East LondonCommunities Organisation) in 1996 andlater the broader London Citizens movementestablished in 2002 which has broughtLiving Wage status, holiday pay and sick payto thousands of Londoners.

In 2004 the then Mayor of London, KenLivingstone built on this grassroots work byfulfilling an election pledge to combatpoverty pay in London by establishing theLondon Living Wage Unit within GLAEconomics. The conclusions of the unit’s firstreport led to the introduction of the LondonLiving Wage – set initially at £6.70 per hour,a figure falling just below two-thirds ofmedian income in the capital. In the LivingWage Unit’s most recent upgrading of theliving wage a 15 per cent top-up margin wasadded to the rate leaving the rate standing at£7.45 per hour. The new Mayor of London,Boris Johnson, continues to encourage allpublic and private sector employers inLondon to pay their workers the LondonLiving Wage as a moral imperative and asound business investment.23

The example and model provided by Londonhas found its echo in initiatives in other partsof the country. Oxford City Council hascommitted itself to becoming a ‘Living Wage’employer by April 2009 setting a living wagerate of £7 per hour for all staff, permanentand temporary, and sub-contracted. In Aprilof this year Manchester City Council and acoalition of unions including Unison, GMB,and Unite/T&GWU signed the ‘ManchesterAgreement,’ a core component of which wasprovision for Manchester City Council to

examine the feasibility of introducing a‘Manchester Minimum Wage on the GLAmodel. Lastly, in December 2008 PrestonCity Council passed a living wage motionwhich will guarantee every employee at thecouncil a wage of £7.45 per hour. Mostrecently, in March of this year Glasgow CityCouncil introduced a Living Wage for allcouncil employees increasing the basic salaryof the lowest paid Council workers by over£1100 a year. In addition, the Council aimsto encourage its suppliers to also pay staffworking on Council business a Living Wageand is developing a Glasgow Living WageEmployer Award to encourage wider uptakeby employers in the public, private andvoluntary sector.

Public sector initiatives have been matched bythose in the private sector. Campaigning byLondon Citizens led to the transformation ofCanary Wharf into a Living Wage Zone and anumber of other employers have alsoincorporated the living wage into theirprocurement policies. The list of living wageemployers now includes HSBC, Barclays,Morgan Stanley, Royal Bank of Scotland,KPMG, Lovells, Macquerie, London FireBrigade, four East London health trusts,Queen Mary University, the London Schoolof Economics, The Big Issue, Child PovertyAction Group, ACEVO, and WestwayDevelopment Trust.

Every one of these pioneering examples of fairpay best practice has benefited those low-paidworkers who have gained living wage status.Moreover, in addition to the obvious benefitsto employers in terms of ethical employerstatus living wage initiatives also make hard-headed business sense in terms of staffturnover savings and boosted productivity. AsGuy Stallard, Director of Facilities – KPMGEurope, argues in chapter 2 below, ‘This isn’tjust about altruism…It is possible to behaveethically, and pay the Living Wage, whileworking to earn a profit.’

Fair pay best practice along the lines of thesenumerous living wage initiatives describedabove clearly makes moral and economicsense. Moreover, fears that recent EuropeanCourt of Justice judgments call into questionliving wage initiatives – an issue that lay at thevery heart of the wildcat strikes over foreignworkers three months ago – may beoverblown. As Professor Keith Ewing arguesin chapter 3: the precise implications of theECJ judgments are far from clear, the natureand substance of living wage policies andobligations are variable and neither the PostedWorkers Directive or the decision prohibit

local authorities from imposing living wageagreements on contractors. In short, as hemakes clear, ‘these decisions do NOT preventsuch policies being pursued.’

These combined reasons should convinceemployers not to fall into the trap of reactingto the economic pressures of the recession byrunning down or scrapping the pioneeringsteps that have already been taken to foster afair pay culture in this country. For thoseemployers who can afford it paying wagesabove the legally mandated minimumprovides a wider contribution to economicrecovery. Wherever fair pay initiatives areenacted they will help provide a fiscal stimulusby furnishing low-income employees with themeans to spend money on their familieswithin their local economy.

In the private sector as in the public, we mustavoid the likely knee-jerk calls to cut wagerates as a way of surviving the recession. ASKPMG make clear, there are far moreinnovative and beneficial means of riding outthe economic storm organizations andbusinesses across the country now face. Wemust maintain those examples of fair pay bestpractice that are already in existence and usethe lessons gained from them to foster aculture of fairer pay.

CCoonncclluussiioonn:: OOuurr vviissiioonn The Fair Pay Network’s vision is a Britain inwhich working people and their familiesremain free of the scars of poverty. To this endwe wish to see a labour market in which theproportion of low-paid jobs is reduced andwhere every individual is given a chance toacquire the skills they need to make sure theirtime on low pay is as short as possible.

Ending the social injustice of low pay is andremains an urgent moral and practicalimperative. We cannot let the undoubtedlysevere pressures caused by the economicdownturn undermine that obligation or thetentative progress that has been made overthe last ten years towards fairer pay. Instead,we must use the space provided by the crisisto rethink how we look at and approachlabour markets in the United Kingdom bymaking it a priority to reduce the incidenceof low pay in our economy, making sure legalwage minimums are real and meaningful, andsustaining those examples of fair pay bestpractice where we find them. In doing so wecan make sure we come out of this recessionmore quickly and with the foundations for afairer, more sustainable, and more sociallyjust economy and society in place. ■

1 The value of the hourly minimum wage in relation tomedian hourly pay 2 http://www.publications.parliament.uk/pa/cm200809/cmhansrd/cm090319/text/90319w0001.htm#090319560001643 Commonly defined as hourly gross pay less than two-thirds of median hourly earnings, see, Jane Millar andKaren Gardiner, Low Pay, Household Resources andPoverty (JRF, 2001)4 Graeme Cooke and Kayte Lawton, Working out ofPoverty: A study of the low-paid and the ‘working poor’(IPPR, 2007) 5 Caroline Lloyd, Geoff Mason, and Ken Mayhew, eds.,Low-Wage Work in the United Kingdom (New York:Russell Sage Foundation, 2008), p. 15 6 Wiemer Salverda, ‘Low-Wage Work and the Economy’in Wiemer Salverda, Maarten van Klaveren and Marcvan der Meer, eds., Low-Wage Work in the Netherlands(New York: Russell Sage Foundation, 1998) 7 Ève Caroli, Jérôme Gautié and Philippe Askenazy,‘Low-Wage Work and Labour Market Institutions inFrance,’ in Ève Caroli and , Jérôme Gautié, eds., Low-Wage Work in France (New York: Russell SageFoundation, 2008) 8 Niels Westergaard-Nielsen, ‘Low-Wage Work inDenmark,’ in Niels Westergaard-Nielsen, ed., Low-WageWork in Denmark (New York: Russell Sage Foundation,2008) 9 Caroline Lloyd, Geoff Mason, and Ken Mayhew, Low-Wage Work in the United Kingdom (Russell SageFoundation, 2008), p. 298-9 10 An individual faces ‘working poverty’ when they livein a household with someone in work but the householdincome is nevertheless below the poverty line

11 Graeme Cooke and Kayte Lawton, Working out ofPoverty: A study of the low-paid and the ‘working poor’(IPPR, 2007)12 Lisa Harker, Delivering on Child Poverty (London:HMSO, 2006)13 Abigail McKnight, ‘Low-paid work: drip-feeding thepoor,’ in John Hills, Julian Le Grand, and DavidPiachaud eds., Understanding Social Exclusion (Oxford:OUP, 2002) 14 E. Balls, J. Grice and G. O’Donnell, MicroeconomicReform in Britain: Delivering Economic Opportunity forAll (London: Palgrave Macmillan, 2004), p. 188 15 Graeme Cooke and Kayte Lawton, Working out ofPoverty: A study of the low-paid and the ‘working poor’(IPPR, 2007) 16 Graeme Cooke and Kayte Lawton, Working out ofPoverty: A study of the low-paid and the ‘working poor’(IPPR, 2007)17 TUC Commission on Vulnerable Employment(COVE), Hard Work, Hidden Lives (TUC, 2008) 18 For periods starting on or after 6 April 200919 http://www.publications.parliament.uk/pa/cm200809/cmhansrd/cm090319/text/90319w0001.htm#0903195600016420 http://www.publications.parliament.uk/pa/cm200809/cmhansrd/cm090324/text/90324w0038.htm#0903247000514521 D Metcalf, On the impact of the British nationalminimum wage and employment (London: LSE Centrefor Economic Performance, 2006) 22 www.minimumincomestandard.org 23 http://www.fairpaynetwork.org/uploadedPDF/GLA_Living_Wage_2008.pdf


NOTES


At the heart of KPMG’s people’sstrategy is our commitment to astrong set of values. This we believelies at the heart of our success in is

our people strategy as shown by us beingnamed Best Big Company to work for, by theSunday Times, three times in the last fouryears. KPMG is a people business andtherefore it is not possibleit is impossible toseparate employees from ‘the a business’.Understanding and aligning employees andbusiness values with those of the business iiscritical to our success.

KPMG’s commitment to our communities,and to corporate social responsibility ingeneral, is a keyone of these values. Paying theLiving Wage, and related employmentbenefits, to our contract cleaners and caterersis part of this commitment.

This isn’t just about altruism. CorporateResponsibility contributes to more efficientbusiness. It offers a means by whichcompanies can manage and influence theattitudes and perceptions of theirstakeholders, building their trust and enablingthe benefits of positive relationships to deliverbusiness advantage.

Research suggests that most people want towork for a company whose values areconsistent with their own and that a majorityof young people believe in the power ofresponsible business practice to improve longterm sustainable profitability. Thus corporateresponsibility is increasingly a key factor in

attracting and retaining a talented and diverseworkforce.

For KPMG, paying the Living Wage is notjust an important part of our values, ourpeople strategy and our award winningcorporate responsibility agenda, it is aboutsound economic management.

We employ 700 (mainly part time) in-houseand outsourced Facilities staff in our UKoffices, many of whom are directly serving ourclients. So, their calibre, motivation andloyalty of this team are extremely importantto us. Paying the Living Wage and improvingother benefits, like holidays, sick pay andinsurance have contributed significantly toour success. Here’s how:

■ Turnover amongst our cleaning staff hasmore than halved.

■ Morale has been raised.■ Despite improved sick pay potential abuse

has not materialised■ Productivity has improved; attitudes are

more flexible and positive■ Service has improved: our help desk gets

far fewer complaints

On top of this our suppliers, the cleaning andcatering companies, have reduced trainingand other overhead costs as employee loyaltyhas grown.

By taking an output based and ‘whole lifecosting’ perspective we’ve incorporatedeconomic, social and environmental factors

The Business CaseBehind Fair Pay Guy Stallard, Director of Facilities, KPMG Europe

into the decision making process. We focus onachieving a clean workplace at best value, noton how little we can get away with paying thecleaners. For instance by encouraging staff torecycle their own waste in central repositorieswe (i) reduce the amount of cleaning required,(ii) make cleaning less unpleasant for ourcleaners and (iii) reduce the charges made forsending waste to landfill sites.

Many people see paying Living Wages as onlysomething to worry about only when theeconomic cycle is buoyant. Such a perspectiveis extremely short term. A really motivatedworkforce is in many ways even moreimportant when businesses are facing reallychallenging times. The focussed sensiblebusiness saves costs by changing service levels(for instance how often carpets are cleaned)rather than reducing wages.

It is possible to behave ethically, and pay theLiving Wage, while working to earn a profit. Itmakes sense as a business strategy since it createsgoodwill among customers, employees and thecommunity. Trying to increase profits by beingunethical or ignoring such concerns willeventually hurt not only those directly impacted,but the business and all its stakeholders.

KPMG’s support of the Living Wage from thevery outset is one of the reasons ouremployees regard the business and itsleadership so highly and that contributes to why the Sunday Times has given us alifetime achievement award as being the BestPlace to Work. ■


This isn’t justabout altruism…It ispossible to behaveethically, and pay theLiving Wage, whileworking to earn aprofit.


Introduction

When the European Social Model was in itsfull pomp, the Community Social Charter ofthe Fundamental Rights of Workers declaredthat ‘all employment shall be fairlyremunerated’. This declaration made in1989 – against the wishes of the then Britishgovernment – was amplified to mean thatworkers were to be guaranteed an ‘equitablewage’, defined in turn to mean ‘a wagesufficient to enable them to have a decentstandard of living’.

The equitable wage principle was repeated afew years later in a Commission Opinion,where it is proclaimed that ‘all workers shouldreceive a reward for work done which in thecontext of the society in which they live andwork is fair and sufficient to enable them tohave a decent standard of living’. Althoughimportant, these principles were not legallybinding, while the forward trajectory of EULabour Law has come to a dead end, at leastfor the time being.

Thus, in four notorious decisions since 11December 2007, the European Court ofJustice (ECJ) has triumphantly placed theeconomic interests of business over the socialrights of workers. In so helping the EU to re-discover its neo-liberal origins, the ECJ hasthus moved almost overnight from being aprogressive body on social questions widelyadmired, to being an extremely conservativebody just as widely despised outside thebusiness world.

The Posted Workers’ Directive

At the heart of the current controversy is thePosted Workers’ Directive of 1996. This isbinding on the United Kingdom, andostensibly requires us to ensure that workersposted here from other member states are not

exploited while working in this country.The Directive does not apply to all terms andconditions of employment; but it does applyto pay, so that employers posting workers tothis country must observe at least thestatutory minimum wage, though this fallssome way short of a living wage, never mindthe prevailing wage that may be applicable inany sector.

In some cases (notably construction), theDirective also says that member states shallrequire contractors to pay the minimum rateslaid down in collective agreements negotiatedbetween trade unions and employers. Butunder Article 3(8) of the Directive this appliesonly where these collective agreements havebeen declared universally applicable to allundertakings in the geographical area and inthe profession or industry concerned.Where, however, there is (as in the UnitedKingdom) no system for declaring collectiveagreements universally applicable, MemberStates may, if they so decide, base themselveson collective agreements that■ are generally applicable to all similar

undertakings in the geographical area andin the profession or industry concerned; or

■ have been concluded by the mostrepresentative employers’ organisationsand trade unions at national level andwhich are applied throughout the country.

The British government has not taken thepower in legislation to use collectiveagreements for this purpose, even whereappropriate agreements do exist. As aresult the statutory minimum wage is thebinding reference point for employersposting workers here. It is true that theenterprise-based system of collectivebargaining we now operate in much ofUnited Kingdom is not readily compatiblewith the arrangements for the application of

The Living Wageand EU LawProfessor Keith Ewing

collective agreements anticipated by theDirective. There are, however, sectorswhere multi-employer collective bargainingstill operates, and where it might be possibleto argue that compliance with collectiveagreements could be made mandatory. Thisis particularly true of the constructionsector, all the more poignant for the factthat it is construction that is singled out inthe Directive as the sector in whichcollective agreements are – or may be – usedas the reference point for minimumstandards to be followed by postingemployers.

The European Court of Justice

Having lain dormant and largely neglected inthis country for the best part of 10 years(despite the best efforts of GMB, UCATTand UNITE which predicted the currentproblems as long ago as 2005), the PostedWorkers’ Directive has been brought to life bythree recent high profile decisions of the ECJ,and has exploded onto the domestic politicalscene as a result of the dispute at the EastLindsey oil refinery in January 2009. So faras the ECJ cases are concerned, the Directivehas been read alongside article 49 of the ECTreaty, which contains one of the so-calledfundamental freedoms guaranteed by theTreaty, namely the freedom to provide servicesthroughout the Union. The cases developingprinciples derived from Article 49 of theTreaty and the PWD, are as follows:

■ Case C-341/05, Laval v SvenskaByggnadsarbetareforbundet (18December 2007)

The ECJ held that although protected bySwedish national law (i) industrial action bySwedish unions, (ii) designed to compel aLatvian contractor to pay Swedish ratesdetermined by a Swedish collective agreementto his Latvian workers employed on Swedishbuilding sites, (iii) was precluded by the ECTreaty, article 49 and the PWD, article 3.Swedish law implementing the PWDdeliberately did not require posting employersto observe prescribed wage rates. UnderSwedish law this was a matter for collectivebargaining and collective action by tradeunions, if necessary (as happened here). In thecourse of its decision, the Court addressedarticle 3(7) of the Directive which provides thatthe key provisions of the PWD ‘shall notprevent the application of terms and conditionsof employment which are more favourable toworkers’. According to the ECJ, however, thisprovision could not be interpreted ‘as allowingthe host Member State to make the provision

of services in its territory conditional on theobservance of terms and conditions ofemployment which go beyond the mandatoryrules for minimum protection’.

■ Case C 346/06, Ruffert v LandNiedersachsen (3 April 2008)

The Court held that a Polish sub-contractor: (i) could not be required by thelaw of Lower Saxony, (ii) to pay his workersposted from Poland, (iii) the terms of acollective agreement in force at a site wherethe work was being carried out. Such arequirement (even though prescribed bylaw) was held not to be authorised by theprovisions of the Posted Workers’Directive. The collective agreement inquestion had not been declared universallyapplicable under German federal law andthere was nothing to suggest that it wasotherwise capable of being treated asuniversally applicable. Moreover, it waspossible to rely on a generally applicablecollective agreement only where there wasno system for declaring agreementsuniversally applicable, which was not thecase here. In any event, the agreement inthis case could not be said to be generallyapplicable, as the binding effect of theagreement applied only to public and notalso to private construction contracts



■ Case C-319/06, Commission vLuxembourg (19 June 2008)

The Court held that the government ofLuxembourg had acted in breach of ECTreaty, Article 49, and the Posted Workers’Directive, on a number of grounds byrequiring posting employers to complywith standards beyond those laid down inthe Directive (including a procedure for theautomatic indexation of wages). The caseis important for limiting the scope ofarticle 3(10) of the Directive which permitsmeasures beyond the minimum set out inthe Directive ‘in the case of public policyprovisions’. But having already read downarticle 3(10) in the Laval case, the ECJ inLuxembourg held that ‘the classification ofnational provisions by a Member State aspublic-order legislation applies to nationalprovisions compliance with which has beendeemed to be so crucial for the protectionof the political, social or economic order inthe Member State concerned as to requirecompliance therewith by all persons presenton the national territory of that MemberState and all legal relationships within thatState’.

Despite the fact that these decisions deal withissues at some remove from the UnitedKingdom (and with issues other than theliving wage), they clearly have potentialimplications for the wages payable to workersposted here (with implications for all workersemployed in the United Kingdom). Althoughit cannot be assumed that employers postingworkers will want to pay (i) a minimum wage,rather than (ii) a living wage, or (iii) aprevailing wage in the host country (whereverthat may be), it is also the case neverthelessthat these decisions would empower thoseemployers who sought to resist any obligationto comply with undertakings other than thoserelating to the minimum wage. But equally,despite the deep bites they inflict, thesedecisions do NOT prevent such policies beingpursued.

The Living Wage

There are three important points to be madeabout these decisions so far as they haveimplications for the living wage. The firstand most important is that it is alwaysimportant fully to take into account thenature and substance of existing living wagepolicies and obligations. At the presenttime these are variable: they often exhortrather than require, though in many casesthe ambition may be greater. But there isnothing in these ECJ decisions to stop localauthorities, trade unions and other activistsdeveloping living wage policies or in seekingto persuade or shame suppliers andcustomers (and indeed anyone else in thelocal authority area) into applying them.Promotional activity and corporatecampaigning for the adoption of living wagearrangements of the kind to be found in anumber of local authorities remainunaffected.

Secondly, neither the Posted Workers’Directive nor the four ECJ decisions discussedabove unequivocally prohibit local authoritiesor others from imposing living wageagreements on contractors. The contestedcollectively agreed terms in Laval and Ruffertwere challenged by the companies (or thoseacting in their stead) in circumstances wherean attempt was made to impose them onforeign contractors (from Latvia and Polandrespectively). It does not follow – and it ishighly improbable - that a domestic contractorcould bring a similar challenge under thePWD in such circumstances. That, however,may not be the end of it, and it remains to beseen to what extent a challenge by a domesticemployer to mandatory terms beyond thoselaid down in the PWD could be brought usingother principles of EU law (as some EClawyers now predict).

Thirdly, although employers posting workersto this country may be required as a matter oflaw to pay only the minimum wage ratherthan a living wage, as already pointed outabove the ECJ in the Laval case made clearthat there was nothing to stop suchemployers from agreeing to observe aprevailing wage or a living wage. Without‘depriving the [PWD] of its effectiveness’, theCourt acknowledged the ‘right ofundertakings established in other MemberStates to sign of their own accord a collectivelabour agreement in the host Member State[establishing terms and conditions ofemployment more favourable than thestatutory minimum and higher than the rateotherwise applicable in the contract of

these [ECJ Rulings]decisions do NOT preventsuch policies being pursued.

employment]’. As the East Lindsey oilrefinery dispute revealed, however, there maybe problems in ensuring that postingemployers fully live up to commitments ofthis kind, when they are not legally bindingand when their employment contracts are notfully transparent.

What is to be Done?

The recent dispute at East Lindsey confirmsthat the political problems caused by thePWD will be impossible to ignore, while thecampaign for a living wage provides furtherevidence of the need to address the ECJdecisions rather than simply to work roundthem. This could be done in one of twoways. The first would be to changedomestic law to ensure that the PostedWorkers’ Directive is implemented to thefullest extent possible, that is to say torequire the minimum wage payable bycontractors to be higher than the minimumset down in the National Minimum WageAct 1998, with its discrimination againstyoung workers, and its lack of an overtimerate. This could be done by requiringposting employers to comply with the wagesset by appropriate collective agreements,which apply to a particular sector within agiven geographical area.

Where – as in the construction sector – thereare collective agreements which are widelyapplicable, legislation should require allemployers (including posting employers) tocomply with these agreements. Under EClaw, this has to be done in a way that does notdiscriminate against employers from otherMember States. In order to protect collectiveagreements from being undercut by non –UK based employers, it may thus be necessaryto provide by legislation that collectiveagreements that apply to the bulk ofemployers in an industry must be observed bythem all, in the sense that the terms of therelevant collective agreements becomemandatory terms of the contracts ofemployment of the workers in the sector inquestion. A proposal of this kind (to givelegal effect to collective agreements withoutmaking them legally binding) was first madeby the TUC in 1931.

Otherwise, there is a need for an amendmentto the Posted Workers’ Directive itself, aspart of the renewal of the European SocialDimension that saw the introduction ofmeasures like the Commission’s Opinion onan Equitable Wage already referred to. Onestep in particular that needs to be taken is torequire posting employers to observe the

prevailing rates operating in the countries towhich they post workers, rather than theminimum rates. The prevailing rates couldbe those rates established by collectiveagreements (at whatever level the agreementmay be set) or the market rate (where this ishigher than the minimum set down in arelevant collective agreement, or where thereis no collectively agreed rate). For thesepurposes an indication of the prevailing ratecould be given by appropriate publicauthorities, though ultimately this would bea matter for a court (or a body like theCentral Arbitration Committee) todetermine.

Conclusion

Now is the time to support such initiativesat domestic and EU level, as governmentstry desperately to pump money intonational economies to help overcome thebanking crisis: there is little point inmaking money available if there are nocorresponding means to enable it tocirculate. The obvious way to do thiswould be to promote living wage initiatives,in order to increase wages, in order in turnto increase purchasing power, in order inturn to stimulate demand. The living wageis one of the keys to economic recovery, andshould be promoted as such. It is sociallyjust and economically rational.

In the meantime, however, there is nothing inthe recent case law of the ECJ (Laval, Ruffertor Luxembourg) that would prevent localauthorities from adopting living wage policiesand in seeking to apply these to contractors.There is a possible risk that a buildingcontractor could challenge a contractualobligation to comply with sucharrangements. But public policy cannotoperate on the speculative basis that such acontractor would be willing to challenge aliving wage or a prevailing wagecommitment, voluntarily undertaken.

It is true that a mandatory living wageobligation would thus be conditional on theconsent of the contractor, where thecontractor is based in another member stateposting workers to this country to performthe work. But the rejection of living wagecommitments is not something that publichostility would allow many businesses readilyto contemplate, especially in the context ofhigh profile public works contracts, wherecompliance with legal standards would bedemanded not by legal remedies, but by acombination of political pressure and popularexpectation. ■



Coalition membercontributions

Chapter 5: TUCMaintaining fair employment in recession

Chapter 6: OxfamAddressing National Minimum Wageviolation and enforcement

Chapter 7: UnisonThe impact of the economic crisis on low payin the public sector

Chapter 8: UniteFair Pay Needs Teeth

Chapter 9: Child Poverty Action GroupLow pay and child poverty

Chapter 10: GingerbreadSingle parents, low pay and poverty

Chapter 11: Counsel and CareWho cares? Low pay and the cost of caring

Chapter 12: National Union of StudentsCreating a fair pay culture

Chapter 13: New Policy InstituteFair Pay – what is positive about therecession

Chapter 14: Migrants Rights NetworkMigrant workers in a period of recession

... A fairnessagenda means acommitment tocontinuing cost-of-living pay increases for low-paid workers,’an increase which‘would generate asubstantial economicstimulus.


The TUC is the voice of Britain atWork, representing nearly 6.5 millionworkers in 59 unions. One worker inevery four belongs to a TUC affiliated

union; wherever people work there are unionmembers. Our overall objective is to raise thequality of working life and promote equalityfor all – and ensuring a progressive responseto the current economic crisis will be centralto achieving these aims. We believe that as wemove out of recession creating a moresustainable basis for growth will be aneconomic as well as a moral necessity.

Today both main political parties in the UK stillargue that Britain’s flexible labour market is theroute to increasing productivity, output and jobcreation. But national and internationalevidence challenges these presumptions. Franceand Germany, with less flexible structures, enjoyhigher productivity and are currently seeingslower rates of increase in unemployment.1In addition, higher benefits and greater jobprotection will mean that workers’ incomes donot fall as far or as fast. As well as being fairer,economists have argued that this will reduce theseverity of the downturn’s impacts in thesecountries. Furthermore, Britain’s strongestperiod of jobs growth was during the late 1990sand early 2000s, when the labour market wassomewhat re-regulated with the introduction ofa national minimum wage, rights to unionmembership and representation, new holidayrights, equal treatment rights for part-time andfixed-term workers and new rights to family-friendly arrangements.

Extreme labour market flexibility is nottherefore a necessary prerequisite foreconomic success and sustainable long-termdevelopment. A new focus is needed that willenable us to build our skills base, increaseworker retention and improve employee

productivity, particularly given the increasedglobal economic competition the UK will facein future years. In this chapter we discuss thecurrent challenges to ensuring fair pay andconditions, and the changes that we believewill be needed as we rebuild our economy.

Current challenges for low-paidworkers

Unemployment

In the course of the recession low-paidworkers will be more likely to lose their jobs.Disadvantaged workers are often caught in a‘low pay – no pay cycle’, first highlighted in agroundbreaking report by the Treasury in1999.2 It found that:■ in the mid 1990s, 50 percent of people

leaving unemployment were unemployedagain within a year;

■ the proportion of men stuck in a cycle ofunemployment and low pay or in a long-term low-paid job had doubled since theearly 1980s from one in 14 to one in seven.

During a recession, this process isexacerbated. The people stuck in this cycletend to be those with low levels of humancapital, members of groups subject todiscrimination or those with problems thatmake them unattractive to employers.

However, much of the media coverage of therecession has focused on individuals whohave lost well-paid jobs, especially in finance.Although there will be occasional people inthis group who fall into long-termunemployment, and others who have to shiftto worse jobs than they would have hopedfor, most will have qualifications andexperience that will make them attractive torecruiters; there is a strong chance that they


TUCMaintaining fairemployment in recessionRichard Excell, Paul Sellers and Nicola Smith


will get new jobs quickly. The longer therecovery takes (and this may be a long drawn-out recovery) the more likely it is that theywill be displacing other slightly less well-qualified jobseekers. They in turn willdisplace less qualified jobs, and thedisplacement will ripple out, leaving thelowest qualified with the longest wait in thequeue for employment, and at the greatestrisk of having to settle for insecure and badly-paid jobs.

Vulnerable employment

During a downturn the risk of vulnerableemployment is greater – people may be moreprepared to put up with bad treatment as theyare scared of losing their jobs, and employersmay use the insecure economic climate tojustify poor treatment, seeing workingconditions as easier to trim than pay rates.Work life balance measures are particularlyunder threat, even though they are oftenassociated with improvements in staffretention and productivity and can provide ameans of providing businesses with theflexibility to come through recession.

At the moment we only have anecdotalevidence of how this may be affectingworkers, but have received reports including:■ directly employed construction workers

bring moved to self-employed contracts, asa way to enable employers to avoid theirlegal obligations;

■ cleaners being told that they have toundertake more jobs per day for the samewages, as a result of redundancies;

■ pregnant women being made redundant asa means to enable employers to avoid thecosts of maternity pay and cover;

■ migrant workers being told that they nolonger qualify for employment rights atwork.

In addition, we have already seen employerscalling for pay freezes3, which would lead toeffective pay cuts for those who are alreadyworse off.

During the recession low-paid workerstherefore face threats to their employment,pay and conditions. But we believe that it willbe possible to emerge from the recession withboth fairer working practices and a strongereconomy – and that there are both moral andeconomic necessities for doing so.

The case for protecting pay andconditions

It is likely that inflation will be very lowduring this recession, and the Retail PriceIndex (RPI) may even turn negative during2009. But the goods and services bought bypeople on low incomes are not the same asthose bought by better paid workers, and theinflation rates they face are not the same. TheRPI is based on a “basket” of goods,effectively an average produced by increasesfor some items and decreases for others, and itis very likely that inflation is going to behigher for the items bought by poorer people.At present, while overall inflation is wellbelow one per cent, the prices of food andheating (which form a large part of low-paidworkers’ budgets) are rising at an annual rateof more than 10 per cent. Housing costs arefalling, and so are the costs of leisure andmotoring, but these items make up a smallerproportion of what poorer workers spend.

The significance of different rates of inflationfor the poor and the rich has been underlinedby the Institute for Fiscal Studies4, who havepointed out that increases in the prices offood and fuel have led to higher inflation ratesamong poorer households than among richerones. Households in the poorest 10 per centof the population had an average inflation rateof 7.9 per cent in September compared to rateof 5.1 per cent for those in the richest 10 percent. The average across all households was6.7 per cent. A fairness agenda means acommitment to continuing cost-of-living payincreases for low-paid workers.

There are also economic benefits tomaintaining wage growth: the currentconstraints on credit have been depressingconsumer demand; depressing pay levels aswell would lead the UK more deeply into avicious cycle of economic problems. Inparticular, increasing the minimum wagewould generate a substantial economicstimulus: a recent study by the Federal ReserveBank of Chicago5 found that US low-paidworkers spend the whole of their minimumwage increases in the local economy, thusproviding a very efficient economic stimulus.

While there may be some cases where unionnegotiators will have to balance preserving jobsagainst pay increases, these will be theexception rather than the rule. Employers musttherefore continue to agree pay rises that are at

Coalition member contributions

least three per cent, preserving staff morale andproductivity and ensuring the welfare of theirstaff. This would be consistent with theexperience of the recession of the early 1990s,when average pay increases consistentlyremained above the rate of inflation.

Good employers will also recognise thatreducing rights at work is no way to build askilled and productive workforce, and that thecosts of mistreatment are higher than those offair standards. If workers do not feel that theirpay schemes are fair, or that they are beingcheated, then they will be strongly de-motivated and productivity will be affected.Fair pay must also therefore includereasonable terms and conditions – holidaypay, sick pay, flexible working and so on.Upskilling is also a necessary condition foreconomic recovery as well as improving jobquality, so access to training will be importantto improve prospects both for low-paidworkers and the wider economy.

What action should be taken?

We believe that there is a strong case foracting now to improve pay and conditions forthose who are already the worst off.

The minimum wage must continue to rise.The Low Pay Commission should take properaccount of the current recession but shouldrecommend the highest increase that can besustained while preserving employment, whichthe TUC believes would lead to an adult rateof about £6.10 per hour in October 2009.

Unions must continue to build membershipamong low-paid workers. While researchshows that both pay and compliance withemployment rights legislation are higherwhere trade unions are recognised6, unionmembership is low among the lowest paid andmost vulnerable workers.7

Investing in enforcing employment rightsneeds to be at the top of the Government’sagenda. The Government has made someimportant changes that will improveenforcement systems, including theestablishment of the Fair EmploymentEnforcement Board and a commitment to setup a single hotline for workers to reportemployment rights problems to. However,state enforcement agencies remain grosslyunder-resourced. For example, the NationalMinimum Wage Compliance Unit still onlyhas around 105 inspectors nationally – andthe Employment Agency StandardsInspectorate only has 26. The TUC believesthat Government needs to commit tosignificant increases in numbers in theimmediate future.

We also need to make sure that everyonehas access to a fair set of employmentrights. Employment status is a confusingand contentious issue in the UK, andassignment to a particular category hasimplications for employment protection.This means that groups including casualworkers, agency workers and home-workersseldom qualify as ‘employees’ and lose outon job security and employment rights. A particularconcern is that growing numbers of workers(particularly in construction andhomeworking) are being classified as self-employed, but are in reality dependentworkers. A simplified, clearer system ofemployment rights would be fairer forworkers and their families, and improveretention and productivity.

It is therefore within the Government’s means to ensure that we leave this recession with a fairer economy – and it is also vital to our economic sustainability thatthey do. ■


1 Evidence from Eurostat (www.ec.europa.eu/eurostat)shows that the unemployment rate in the UK is risingfaster than the EU average. And the OECD has foundthe impact of employment protection legislation onemployment rates is fairly neutral, making it slightlyeasier to hire but also easier to fire: OECD (2004)OECD Employment Outlook 2004 Employment ProtectionLegislation and Labour Market Performance Paris:OECD.2 HMT (1999) Tackling Poverty and ExtendingOpportunity London: HMT.3 For example, Institute of Directors, IoD condemnsGovernment over £1 billion regulation ‘bombshell’,Press Release, 19th January 2009. 4 Institute for Fiscal Studies, Poorest households facehighest average inflation rates, Press Release, 14th

October 2008.5 Aaronson D, Agarwal S and French E (2008) TheSpending and Debt Response to Minimum Wage HikesChicago: Federal Bank of Chicago.6 For example see Goos D and Adam-Smith D (2001)Pragmatism and Compliance: Employer Responses tothe Working Time Regulations Industrial RelationsJournal, Volume 32, Issue 3, p195-208 or Reilly, Paciand Holl Unions, Safety Committees and WorkplaceInjuries British Journal of Industrial Relations, Volume33, No. 2, p276-88.7 The Commission on Vulnerable Employment foundthat among vulnerable workers union membership isonly ten per cent: TUC (2008) Hard Work Hidden Lives:The Full Report of the Commission on VulnerableEmployment London: TUC

NOTES


In 1998, the new Labour governmentenacted its flagship employment rightspolicy, the national minimum wage(NMW). This was to ensure that every

worker – British and foreign national alike –was entitled to a minimum remuneration fortheir labour, seemingly signalling the end ofshamefully low wages at the bottom end ofthe labour market.

Yet while it is clear that the nationalminimum wage has benefited millions overthe past ten years, the government hasstruggled to guarantee and enforce it for themost vulnerable in the workforce. As therecession takes its toll, enforcement of thenational minimum wage requires urgentattention to ensure that employers do not cutcorners and force the most vulnerable workersinto poverty.

In an increasingly competitive globaleconomy, businesses are seeking to reducecosts to the minimum, often by reducing thecompensation and benefits available to theworkers who produce their goods andservices. This situation is exacerbated by thechanging nature of work, with lower-skilledsectors demanding flexible labour with lowwages and few rights for the workers. In theUK the workers that are most affected by thisclimate are those on the margins of theformal economy (for example men andwomen in precarious employment, working

in the ‘cash’ economy) and those who arevulnerable for other reasons, such as becausethey are migrant workers or have insecureimmigration status.

A vulnerable worker is someone working inan environment where the risk of beingdenied employment rights is high and whodoes not have the capacity or means to protectthemselves from that abuse.1 In 2008, theTUC estimated that more than two millionpeople in the UK are in vulnerableemployment, though it should be noted thatis based on a conservative estimate of just500,000 undocumented migrants andinformal workers.2 Vulnerable work causesand perpetuates poverty, as the employersexploit their power over the worker to ensurethe work remains insecure, low-paid and withlittle prospect of promotion or training.3 Thisinsecurity takes many forms, including lowpay and non-adherence to the nationalminimum wage.

Certain groups of people working in certainsectors are less likely to be paid the nationalminimum wage: temporary employees,agency workers, migrant workers, workers inthe informal sector, homeworkers, womenand BME workers,4 and those working incare, cleaning and hospitality.5 LondonCitizens found that people working in thehotel and catering sector were the lowest paidof all the low paid workers they surveyed,


Addressing national minimum wageviolation and enforcement

Krisnah Poinasamy

OXFAMLow pay in the

economic downturn

with almost one in five were paid belownational minimum wage, with the ratedoubling for BME and migrant workers.6Likewise, women are often more vulnerableat work: three-fifths of low-paid workers inthe hotel and catering sector are women.7Migrant workers are three times more likelyto seek advice about wage and NMW issuesthan other employment issues8 and morecalls are made from the hospitality sectorthan from any other sector.9 Those workingin sectors where union representation is loware also at risk of not being paid the nationalminimum wage.10 It is thought that about300,000 workers are paid below the agreedrates of national minimum wage, though thisis likely to be an underestimate, as manyworking informally may not show up insurveys.11 One respondent to the LondonCitizens survey demonstrates the exploitationof workers in the hotel and catering industry:she worked weekends and beyond her shiftwith no extra pay, and recently had twohours’ worth of wages docked when she waslate for work due to a medicalappointment12.

Despite the Government’s attempt tointroduce a minimum rate of pay for allworkers, this has not preventedunscrupulous employers from circumventingthe national minimum wage through piece-rate pay. Sectors in which vulnerable work iscommon are especially prone to payment bypiece-rate. In the hospitality sector, forexample, chambermaids may be paid perroom and then asked to clean a varyingquota of rooms each day.13 Homeworkers –predominantly women working from homedoing jobs such as sewing, packing and printfinishing – are also at risk14. In a recentstudy of homeworkers, 48 per cent said theywere not paid the national minimum wage,with two-thirds paid by piece-rate.15 Ofthose working at a piece-rate, the averagewage was £4.41 – well below the nationalminimum wage.16 In one case, ahomeworker was earning just £1 per hour.This exploitation persists despite the specificinclusion of homeworkers within theNational Minimum Wage Act 1998.17

Payment of the national minimum wage isfurther circumvented through theemployment status regime and the use of false(or ‘bogus’) self-employment. This is whereworkers may be told that they are self-employed, even if in practice they do not havethe independence or control over their workpatterns that would enable them to genuinelynegotiate terms. False self-employment is

common amongst homeworkers andparticularly rife in the construction industry,with estimates that 375,000-425,000 workersare falsely self-employed in construction inthe UK.18 Though it is not suggested that allfalsely self-employed workers are paid underthe minimum wage, their self-employmentstatus means that there is no obligation for theconstruction companies to meet the nationalminimum wage.

To a large extent, non-payment of thenational minimum wage is due to insufficientenforcement from Her Majesty’s Revenue &Customs (HMRC). Many employers andemployment agencies know that they couldget away with flouting the law and that, evenif caught, they are unlikely to face more thanminimal punishment.19 HMRC have fewerthan one hundred inspectors, five per cent ofthose available to the DWP’s benefit fraudunit.20 Indeed, it has been estimated that theaverage employer could expect a visit fromHMRC once every 320 years.21

In addition, those who are least likely to bepaid the national minimum wage are alsothose least likely to know about their rights atwork and know how to seek help and advice.For example, migrant workers are oftenunaware of their employment rights due tolanguage issues. Though HMRC does respondto complaints made about employerssuspected of not paying the minimum wage,these complaints are unlikely to come fromthe most exploited workers, who may beconcerned about being penalised or victimisedby their employer. As the economic climateworsens, those unwilling to risk the loss of


enforcement ofthe national minimumwage requires urgentattention to ensure thatemployers do not cutcorners and force themost vulnerableworkers into poverty.


their job or the exposure of their immigrationstatus are even less likely to take action againsttheir employer.

Crucial to the system of enforcement is theconfidence of those who are not being paidthe NMW to come forward and reportviolations. In particular, many migrantworkers often do not report violationsbecause they fear that doing so will result ineither the loss of their job or deportation.Irregular migrants, of which there areapproximately 700,000 in the UK,22 areextremely vulnerable to violations of NMWas they do not have a legal status in the UK.Though it is impossible to tell how many ofthese migrants are working or indeedunderpaid, it is clear that the risk ofdeportation would be too great for any toreport a violation of the minimum wage.Though calls made to the NMW helpline canbe anonymous, this policy is defunct giventhat there is an agreement to exchangeinformation between HMRC and the UKBorder Agency.23 The very requirement toreport any use of irregular migrant labourthwarts the ability of HMRC to reach thoseleast likely to be paid the national minimumwage. Elsewhere in the world, systems exist toensure rights at work are separated fromimmigration control; it is clear here thatenforcing a fundamental employment rightshould not be hampered by concerns aboutimmigration.

Yet better enforcement is not simply aboutmore information and a larger number ofinspectors, but requires a coordinated effortthat is targeted at sectors in which vulnerableemployment predominantly occurs. Thecurrent enforcement regime is characterisedby its fragmented nature. The EmploymentAgency Standards Inspectorate, theGangmasters Licensing Authority and theHealth and Safety Executive are all likely tocome across violations of the nationalminimum wage when investigatingviolations of employment law in theirspecific areas of competence. However, theyhave no enforcement power in this regardand there is no guarantee that violationsfound by other enforcement agencies will bepursued by HMRC once reported. Thegovernment has attempted to address thisissue through the Fair Employment Board,which had its first meeting in November2008. However, this board falls far short of a

single, well-resourced enforcement bodywhich could utilise expertise in specific tosectors and pursue violations as they areuncovered.

Conclusion and recommendations

Addressing the violations of the nationalminimum wage requires a fundamentalreshaping of the government’s approach toemployment status and enforcement. Self-employment, far from enabling autonomy,has become a route through whichunscrupulous employers, holding clear controlover the employment of the worker, canlegally pay them less than the nationalminimum wage. Self-employment and theemployer-employee relationship must beredefined through legislation to root out theuse of ‘bogus’ self-employment. Furthermore,ways in which piece-rate pay that often resultsin a failure to meet the minimum wage mustbe examined. There should exist, as thegovernment intended, a minimum pay floorfor all workers.

The fragmented nature of the currentenforcement regime is largely to blame forallowing employers to violate the nationalminimum wage. Investment in HMRC’sproactive resources would be a significant andtimely first-step towards enforcing thenational minimum wage in a time when thosemost vulnerable would be reluctant to reportviolations. Yet this must be accompanied byan overhauling of the enforcement regime. Inabsence of a single enforcement body, thefailure to allow other agencies to enforceviolations when found is a wasteful use ofresources. The government’s approach shouldrecognise that violations are more likely tooccur in certain sectors and to certainworkers. Despite efforts to improve awarenessof the national minimum wage amongstmigrant workers, the government mustrecognise that linking enforcement andimmigration fundamentally thwarts theeffectiveness of their pay policy. Theagreement to share information betweenHMRC and UKBA severely hampersenforcement and should be reassessed.

As we approach the tenth anniversary of theNational Minimum Wage Act entering intoforce and as the UK enters recession, thegovernment must redouble its efforts andensure that all can benefit, including the mostvulnerable. ■



1 BERR, Vulnerable Worker Enforcement Forum FinalReport (2008), p.4, available athttp://www.berr.gov.uk/files/file47317.pdf 2 TUC, Commission on Vulnerable Employment (2008),p.24, available athttp://www.vulnerableworkers.org.uk/cove-report/full-report/ 3 Labour Force Survey 2007 found that over twice theproportion of temporary agency workers had never beenoffered training by their employer than the proportionof all employees.4 TUC, One in five is a vulnerable worker, Sep. 2006,available at http://www.tuc.org.uk/welfare/tuc-12380-f0.cfm 5 TUC, Commission on Vulnerable Employment (2008),p.126 Queen Mary, University of London/London Citizens,Making the City Work: Low Paid Employment in London(2005), p.5, available athttp://www.geog.qmul.ac.uk/globalcities/Report2.pdf 7 Ibid.8 BERR, Vulnerable Worker Enforcement Forum FinalReport (2008), p.139 BERR, Government Evidence to the Low PayCommission on the effects of the National Minimum Wage(2008), p.10 http://www.berr.gov.uk/files/file49192.pdf 10 COMPAS, Fair enough? Central and East Europeanmigrants in low-wage employment in the UK (2006),available athttp://www.compas.ox.ac.uk/changingstatus/Downloads/Fair%20enough%20paper%20-%201%20May%202006.pdf; in a survey of 600migrants, none of were found to be members of a tradeunion.11 National Statistics (2007) Annual Survey of Hoursand Earnings (ASHE) Estimates for Spring 2007.London: National Statistics.

12 Queen Mary, University of London/LondonCitizens, Making the City Work: Low Paid Employment inLondon (2005), p.2613 Queen Mary, University of London, ‘SubcontractingBy Stealth’ In London’s Hotels: Impacts And ImplicationsFor Labour Organising (Just Labour: A Canadian Journalof Work and Society 2007), p.90, available athttp://www.justlabour.yorku.ca/volume10/pdfs/07EvansPress.pdf 14 National Group on Homeworking, Subject to Status(2007), p.15, available athttp://www.ngh.org.uk/resource-files/Subject_to_Status1195636482.pdf 15 National Group on Homeworking, Subject to Status(2007), p.3116 ibid.17 National Minimum Wage Act 1998 s.3518 Innovations Report, Report reveals cost of false self-employment in the UK construction industry (2008),available at http://www.innovations-report.com/html/reports/economy_finances/report-110263.html 19 TUC, Commission on Vulnerable Employment(2008)20 TUC, Commission on Vulnerable Employment(2008), p.13621 ibid.22 JCWI, The case for regularising irregular migrants(2006), available athttp://www.jcwi.org.uk/campaigns/workersrights/RegularisationReport.pdf 23 UKBA, Enforcing The Deal: Our Plans For EnforcingThe Immigration Laws In The United Kingdom’sCommunities (2008), p. 16, available athttp://www.ukba.homeoffice.gov.uk/sitecontent/documents/managingourborders/enforcementbusinessplan08_09/enforcementbusinessplan08_09.pdf?view=Binary

NOTES

Oxfam works with poor and marginalised workersto get better labour rights all over the world.

Oxfam’s been involved in many successfulcampaigns – such as increasing the minimum wagein South Africa; winning safer factory standards in

Central America; fighting off threats to makepermanent workers ‘temporary’ in Indonesia and

Honduras; supporting migrants to successfullynegotiate a contract for eight thousand workers in

the US. Here in the UK, Oxfam’s Migrant WorkersProject works with migrants, often agency workers,who’ve experienced exploitation in the workplace.We also have a longstanding partnership with the

National Group on Homeworking (nowHomeworkers Worldwide) supporting them to

advocate for the rights of homeworkers.


As we witness the spectacle of bankchiefs apologising for their greedand dubious practices, it is easy toignore the less spectacular impact

that the economic downturn is having on thepublic services.

Less money coming in

Public finances were tight even before theeconomy started to nosedive last September.In January 2008

the government announced that public servicepay rises would be held to the government’s2% inflation target. UNISON and otherpublic service unions warned that workers’salaries were falling far behind the soaringincreases in basic living costs. Moreover, weargued that this short-sighted policy wasdestined to undermine Labour’s broaderpolicy agenda. “The government has set itselfambitious targets for eradicating child povertyby 2020, for combating ill health and socialexclusion and for getting people into work.All of these goals will be undermined if publicservice workers are not paid incomes thatallow them to adequately support themselvesand their families.”1

Now local authorities, health trusts and otherpublic service employers are facing severebudgetary pressures that are likely to get worseover the next few years as a result of thedeepening recession. The economic slowdownwill have the effect of reducing the amount of

money coming in to government throughtaxation raised on earnings (such as incometax), profits (such as corporation tax), orspending (such VAT or stamp duty). Theslow-down is already having a negative impacton tax revenues and the resources available forpublic spending, squeezing central and localgovernment budgets and adding pressure forfurther pay cuts.

Collapse of private finance

The public sector has been left deeply exposedto the crisis by the government’s privatisationpolicies which have made many services andinvestment projects heavily dependent uponprivate finance. The credit crisis is alreadyresulting in services failing and projects beingabandoned – and increased costs to thegovernment forced to pick up the tab. In theLondon Borough of Newham, for example,new schools due to be financed privatelyunder Building Schools for the Future havebeen postponed due to “unforeseencircumstances, including the credit crunch.”And Newham is not alone. The £45 billionBuilding Schools for the Future programme,half of which is under PFI, is also facingserious problems finding finance to rebuild orrefurbish 3,500 secondary schools. Accordingto the Times, 60 projects worth more than£2.3 billion, and involving more than 100schools, colleges and hospitals, have also beendelayed or are on hold due to financial andplanning difficulties. 2


UNISONThe impact of the

economic crisis on lowpay in the public servicesDeborah Littman

Less money, fewer jobs

Many public service employers areannouncing redundancies as a result of tightspending settlements. By the end of 2008, 13per cent of local authorities said they hadmade redundancies as a direct result of theeconomic slowdown, and 22 percent hadintroduced a recruitment freeze.3 Surveysindicate that planned council job losses couldtotal more than 70,000 4. HousingAssociations and voluntary organisations arealso shedding jobs and leaving vacanciesunfilled.

As fears about job security become moreurgent, there will have less leverage to push uppay rates for public service workers, alreadystruggling to meet rising food, energy andtransport costs. Minimum pay rates across thewhole of the public services average £13,026per annum. Minimum rates in the NHS andLocal Government are £12,182 and £11,577respectively. Recent research funded by theJoseph Rountree Foundation has confirmedthat even a single person with no dependents,living in council housing, needs £13,400 ayear before tax to afford a basic, butacceptable standard of living.5 That meansthat many thousands of public service workers– especially those with families to support –are living far below the level needed for anadequate living standard.

In addition, many public service workers,including 3.5 million members of the localgovernment pension scheme, are dependenton pension funds whose viability is nowthreatened by the destruction of the value oftheir asset base. Contrary to commonperception, pension entitlements for thelargely female, frequently part-time publicservice work force were not lavish to beginwith. The average pension pay out for afemale local government employee stands at£1,600 a year, and for a man £3,600 — littleenough to live on at the best of times. 6

Wider impact of low pay and joblosses in public services

Public service job losses and pay cuts willfurther deepen the recession by takingdemand out of the economy. Research hasshown that every pound spent on local publicservices generates an additional 64 pence ofspending in local businesses, helpingregeneration 7.

Economists have warned that “for some citiesand regions public sector employment willplay a very important stabilising role in thedownturn. Reductions in public expenditure

will make it more difficult for these cities toweather the economic storm”. 8

Other experts have cautioned that job cuts area “false economy” for employers – everyredundancy generates an extra £16,000 inaverage additional costs, as well as hitting themorale, motivation and productivity ofremaining staff. 9 Public service job losses alsohave an adverse affect on the government’sfinances – public service employees pay tax ontheir earnings, while any made redundant willsimply add to the numbers needingunemployment benefits.

Ironically, the downward pressure on publicservice pay and employment is coming just ata time when public services are urgentlyneeded to protect individuals, families andcommunities from the worst effects of thedownturn. Local authorities are reporting arise in demand for debt counselling, housingadvice, employment guidance, communityfinance and business support. Voluntaryorganisations are also needed to respond togreater incidence of mental illness,relationship breakdown, domestic violenceand homelessness. The NHS will need toensure that loss of income or employmentdoes not lead to a lack of access to highquality healthcare. And public service workerswill play a key role in providing employmentadvice and enforcing current minimum wagelaws and other labour regulations.

Impact on fair pay

Prior to the downturn, attempts to convinceemployers to implement living wage and fairpay regimes were gaining ground. UNISONhas long had a policy of negotiating higherincreases for the lowest paid and restructuringpay and grading systems to eliminate genderdiscrimination and reward the skills of thoseat the bottom of the pay ladder. Progress hadalso been made in eliminating the two-tierworkforce where workers on private contractswere paid less than those still on public servicerates. In the NHS, police and localgovernment, statutory codes of practicerequired pay rates for staff on privatecontracts to match those negotiated for thepublic sector. A number of universities andvoluntary organisations had also agreed toinclude ‘living wage’ clauses in theirprocurement regimes, and some had takenlow-paid contract workers back in-house.

The downturn threatens to slow this processas public service employers re-examine theirfinances. While campaigners have argued thatthe cost of ensuring a living wage to all



directly and indirectly employed staff is morethan offset by the benefits reaped in lowerturnover, absenteeism and training costs,employers may well be unwilling to take riskswith their current employment practices.

There is also the danger that publicauthorities will use the recession as asmokescreen for driving down pay. TheNational Auditor’s report “Crunch Time?”questioned whether local authorities were asfinancially stressed as they claimed. “Theexpenditure that has seen the highest level ofinflation – gas, electricity, fuel and food –make up less than 2 percent of total localauthority spending.”

What can we do?

Public service workers should receive payincreases based on the real needs of familiesand communities. There is no point savingmoney from one Treasury ‘pocket’ only tohave it paid out in higher benefits for thosepushed below the poverty line. And wherework has been contracted out to the privatesector, public authorities should insist thatpay and conditions match those of publicservice workers.

The government must commit the necessaryincreases in public funding to meet growingpublic service needs. Currently there are plansfor a further sharp slowdown in publicspending growth from 2010 to reduce deficitscreated by the collapse of the financial sector– and others are arguing for even bigger cuts.This will be bad for our public services, badfor our economy and bad for our society.Public debt should be paid off by taxing those

best able to pay, not cutting services uponwhich the majority depend.

We should also accelerate public investmentin affordable housing, schools and healthfacilities, and environmental projects such asflood protection measures, to create jobs andboost demand. This cannot be dependentupon private finance and private developers –councils and other public bodies must beempowered to invest directly.

Ultimately, the government must recognisethat cutting public service jobs, pay andinvestment will only make the downturnworse. ■

1 Deborah Littman, “The price is not right”, Chartist, March/April 2008,http://www.chartist.org.uk/articles/econsoc/mar08_littman.htm2 Labour forced to call for help as building programmestalls, The Times, January 26, 20093 Local Government Association, Dec 20084 ‘Councils start to shed jobs in their thousands’, The Times, 14 Jan 2009.5 www.minimumincomestandard.org 6 Trade Union Side of the National Joint Council forGovernment Services (England, Wales and NorthernIreland) Submission to the Advisory, Conciliation andArbitration Services (ACAS) over the NJC Pay Awardfor 2008 – 2009.7 APSE, Exploring the economic footprint of publicservices, 2008.8 Work Foundation, Hard Labour: Jobs, unemploymentand the recession, Nov 2008.9 Chartered Institute for Personnel Development, Jan 2009.

NOTES

the government mustrecognise that cuttingpublic service jobs, pay andinvestment will only makethe downturn worse



Fair pay needs enforcement with teeth that will fight for the rights of vulnerable workers to be honoured.

The best guarantee for the respect of rights isstrong trade union organisation in the worldof work. That is why we are organising themost vulnerable and hard-to-reach. Key also isthat those charged with enforcing the lawoperate more effectively in future. If it is truethat real progress has been made from theNational Minimum Wage through protectionagainst discrimination to action to endmodern day slavery in the twilight world oftemporary and agency work, it is also true thatthe enforcement culture has failed to keep pacewith challenges facing workers today.

Unite has been a champion of vulnerableworkers, combating abuse in what is a three-tier workforce, the newly arrived who timeand again are exploited, workers here forgenerations who are undercut and the mostvulnerable, those 800,000 undocumentedworkers. Organising at the sharp end, we haveencountered migrant workers being underpaidand, at its most obscene, trafficked.Trafficking in law is also holding out tomigrants in their country of origin whenrecruited that they will be treated well andthen confronting them with a grim and verydifferent reality upon their arrival.

We have encountered a “flexible labourmarket” which forces many workers into “self-employment” so that employers can dodgetheir responsibilities. We have encountered a“flexible labour market” which fosters alowering of wages and a growth in insecurity,as seen in the treatment of agency workers inthe food and agriculture sector and contractcleaners in the City of London.

Yet the five enforcement agencies have yet torise to the challenge of eliminating abuse,enforcing workers’ rights and ensuring thatthere is no place in the marketplace for rogue

employers who undercut the reputable. Yes,some progress has been made but only now asa consequence of the work of theGovernment’s Vulnerable Workers Forum andthe TUC Commission on VulnerableEmployees is there action underway on co-ordinated and effective enforcement.

I sat on both the Forum and the Commissionand now represent the union on the FairEmployment Enforcement Board establishedas a result of the proposals from both. Atlast, we are meeting together with the fiveenforcement agencies determined to drive upenforcement standards.

The Board is driven by a joint determinationto enforce the law to end exploitation andundercutting. Key will be:■ Political will, with enforcing workers rights

given top priority.■ The resources necessary.■ A major awareness campaign so that workers

know their rights and employers know theconsequences of flouting their rights.

■ The enforcement agencies workingtogether, sharing intelligence and clampingdown on bad employers, putting the worstin the dock.

Of course as trade unions we want the lawstrengthened and extended. The soonerstrong law is introduced honoring thecommitment on equal treatment of agencyworkers and the directly employed, the better.Likewise, the extension of the remit of theGangmasters Licensing Authority, the mosteffective of the enforcement agencies, to coverConstruction is essential. Government andsome employers may not agree but ourcampaign for stronger rights will go on.

But rights without redress, enforcementwithout teeth, is little use to the millions ofvulnerable workers in modern day Britain.The Fair Employment Enforcement Board can,if we get it right, make a real difference. ■

UNITEFair pay needs teeth Jack Dromey


The UK Government has committeditself to eradicating child poverty by2020. There is much consensus overthis objective at UK level and within

devolved Government. To deliver on itsvision to eradicated child poverty,Government has: ■ sought to get more parents into work

(especially lone parents and disabledpeople);

■ developed policies to try to ‘make workpay’ (through national minimum wageand working tax credit);

■ redistributed towards families withchildren (through child benefit and childtax credit); and

■ introduced long term policies like surestart to improve long term child outcomes.

Getting more parents into employment hasbeen central to child poverty ambitions.Poverty has often been run together withworklessness in public or media debates; butmost poor children live in households whereone or more parent is in employment.

The causes of in-work poverty are three-fold(1) inadequate pay; (2) parents unable to worksufficient hours to get above the poverty line;and (3) larger family size. The solutions are,the support for parents to work longer hourswhere this fits with their family circumstances,additional help for those for whom wages areunlikely to meet additional needs (for instancelarger families or those affected by disability)and in particular, decent pay.

The rest of this chapter explores what needs tobe done to help employment support anti-child poverty policies. It argues that thoughthe current economic situation is difficult, theUK should be plotting a course out of

recession which reverses current the economicinequality gulf. Tackling low pay is a key partof ending in-work poverty and is central todelivering a fairer society, it should be‘everybody’s business’.1

Work as a route out of poverty?

Children in households without a parent inemployment are at a very high risk ofpoverty, around four times the risk ofchildren who have a parent in paid work (seetable 1). There are however many morechildren living in families where one or moreparents work and so despite this lower risk,59% of poor children are in in-workpoverty.2 Starting a job is not a safe route outof poverty: in one in three cases moving intoemployment from out of work povertysimply shifts a family into in-work poverty.3In comparative terms, the UK combines ahigh employment rate (highest of the largecountries of the European Union) and ahigh rate of child poverty: for these childrenparental employment has not provided aroute out of poverty.

The table shows the different risks of povertyand material deprivation using threemeasures, two of which (the first twocolumns: low income and materialdeprivation and relative low incomes, beforehousing costs) are part of the official measureof child poverty. The third column providinga measure (relative low incomes after housingcosts) which CPAG believes is a betterindicator of disposable incomes.

The key point to draw from the table is thatthough the rate of poverty and of materialdeprivation is much higher for families whereparents do not work, poverty rates remainhigh in all households without full time workor two employed parents.


CPAGLow pay and child poverty

Paul Dornan

One solution is therefore to increase parentalhours, and though policy should support parentsto work longer hours where they wish to do so,longer hours come at a price of less time toparent. One study, for instance, estimated acouple, paid at the minimum wage level, withtwo children would need to work 58 hours aweek to lift the family above the poverty line:5 aminimum of one full time and one part timeworker, just to get above the line let alonebeyond it. For lone parents, unable to work suchlong hours, even full time employment stillleaves more about one in fifteen children inpoverty in these families. Better pay is needednot just parents working longer hours.

Making work pay?

Alongside seeking higher employment rates,Government has tried to improve gains fromwork. The national minimum wage (NWM)has been introduced as a wage floor; workingtax credit provides a more generous tax creditsubsidy for low wages; and policy has soughtto provide more help with some of the costsof employment (especially childcare, boththrough increased supply side investment,through a payment within the working taxcredit and through support via employers).

The national minimum wage has provided awelcome floor for wages, its introduction wasnot followed by the unemployment predictedby its opponents and overtime the rate has

been increased somewhat. Theprinciple of the minimum wage hasbeen proven and more should bedone to increase it and to increasethe lower rates (in particularlowering the age for the adult rate ofthe NMW to cover 21 year olds asthe Low Pay Commission hasurged6). For families with children,however, entitlement to working tax credit ontop of low wages increases the real minimumlevel, though with the downside that this is notguaranteed (not all entitled to the working taxcredit get it, whereas the vast majority get thenational minimum wage or better) and thisdraws people into the tax credit system.

The working tax credit (WTC) is moregenerous and has wider eligibility criteria thanprevious provision. There are two central taxcredit payments, the child tax credit whichdirects support to families with children andwhich can be claimed out of work and in lowand moderately paid employment7 and theworking tax credit which subsidises low paywork, the WTC also contains a child-carepayment. It is welcome that low wages areincreased through the tax credit system torecognise how inadequate these often are tomeeting family needs.

However the difficulty of wage subsidy is boththat parents are likely to prefer income toderive from employment, rather than a subsidy


TTaabbllee 11:: RRiisskk ooff ppoovveerrttyy bbyy eemmppllooyymmeenntt ttyyppee

Key Government CPAG preferredmeasure measure

Relative low incomes Relative low incomes Relative low incomesand material deprivation (before housing costs) (after housing costs)

LLoonnee ppaarreenntt

In full-time work 5 7 16

In part-time work 19 19 33

Not working 58 58 77

CCoouuppllee wwiitthh cchhiillddrreenn

Both in full-time work 0 2 4

One in full-time work, one in part-time work 1 3 6

One in full-time work, one not working 10 20 30

One or more in part-time work 25 47 54

Neither in work 56 68 77

AAvveerraaggee rriisskk 1166 2222 3300

Source.4 There is a low income measure in each indicator, for the first column this is living in householdswith incomes below 70% of median income (adjusted for family size), in the second and third is 60% ofmedian income (adjusted for family size).

from government to low paying employers,and that this enmeshes families in the taxcredit system. The current tax credit system,introduced in 2003, has been improved aftersignificant implementation problems, withearly problems of high overpayment and errorrates reduced if not solved,8 non-take up ofsupport remains a key problem,9 the systemremains complex to understand and errorprone and early evidence suggested tax creditsactually increased, not decreased, incomeinstability.10 Recognising the need for highertake home income is necessary for tacklingpoverty, but CPAG would like to see moves toincrease not only income levels but theproportion provided through wages.

Four challenges to help employmentsupport tackling child poverty

This section makes four specific suggestionsto help tackle low pay, and ensure employerssupport tackling child poverty.

11)).. IInnccrreeaassee tthhee nnaattiioonnaall mmiinniimmuummwwaaggee:: ending child poverty is everybody’sbusiness, low pay shifts the responsibility andburden of child poverty from employers tofamilies and to children. The nationalminimum wage provides a popular floor towages which can counter-balance the high payinequality at the top of the pay scale.Increasing the minimum wage over time inreal terms, and especially once the UK beginsits economic recovery is a vital tool to offsetdamaging pay inequality.

22)).. PPuutt mmoorree eemmpphhaassiiss oonn jjoobb qquuaalliittyyaanndd ppaayy pprrooggrreessssiioonn ttoo eenndd tthhee‘‘rreevvoollvviinngg ddoooorr’’:: low pay work and pooremployment conditions are closely linked.Often low job quality (including inflexibilityand low pay) means that work cannot besustained and a family is caught in a‘revolving door’ between employment andbenefits. The solution to this churn in andout of work which undermines child well-being and which particularly affects loneparent families11 means more support forparents with the costs of employment, but italso means decent pay to ensure families aregenuinely better off in work. As well as betterpay, Jobcentre Plus and employment agenciesshould shift from merely measuring job starts to ensuring that employment issustained over a longer period and that payprogression occurs.

33)).. PPuubblliicc sseeccttoorr lleeaaddeerrsshhiipp oonn llooww ppaayy:: a quarter of low paid jobs are in the publicsector.12 Here Government (local, central andacross the devolved administrations) is activelyallowing the culture of low pay to continue,whilst subsidising it through the tax creditsystem. We urge leadership to root out lowpay in the public sector and show allemployers the responsibilities they have to paya decent wage. Tackling low pay in the publicsector could provide a powerful fiscal stimulusgiven that low paid workers need to spendmore of their incomes than other employees.

44)).. EEmmppllooyyeerr ppaayy aauuddiittss ttoo rreedduucceeddiissccrriimmiinnaattiioonn:: CPAG urges wider use ofpay audits to uncover patterns of differentialpay. It is unacceptable that vulnerable groupssuch as lone parents (usually women),disabled people and black and minority ethnicgroups often receive lower pay than themajority, we urge use of pay audits as a tool tohighlight where differential treatment isoccurring and to help tackle this problem.

Conclusion

This chapter has a simple conclusion: highrates of in-work poverty are a standing reproofto a child poverty strategy so reliant ongetting parents into work. More must be doneto go beyond the so-called ‘work-first’approach of increasing the employment rate,to ensuring parents earn more and progressthrough employment, quality needs to bevalued alongside quantity.


... Starting a job is nota safe route out of poverty:in one in three casesmoving into employmentfrom out of work povertysimply shifts a family intoin-work poverty.


The economic situation is undoubtedlydifficult, and highlights how vulnerable workfirst policies are. Rising unemployment is amajor threat to tackling poverty, especially asgroups such as disabled adults, the low skilledand lone parents may be at particular risk oflosing work. For 30 years the UK has sufferedhigh inequality, with unacceptable childpoverty rates and with the opportunitieswhich decent incomes afford, denied to asignificant minority. The route out of therecession should be a fairer society, and CPAGurge putting in place policies to ensure boththat those weakest in the labour market noware protected and that when the economybegins to recover it is these groups – not thehighest paid – who gain the most, narrowinggaps and ensuring that low pay does notcontinue to undermine anti-poverty policy.

The Low Pay Commission will undoubtedlyface a formidable balancing act in proposingchanges in the National Minimum Wage,given difficult economic circumstances, risingunemployment and pressure on businesses.At the same time, though everything must bedone to protect jobs in the downturn it wouldbe wrong to enforce the toughest restraint onthe lowest paid workers: we urge the NationalMinimum Wage should be used as a vehicleto narrow pay inequalities, this should happenparticularly aggressively once the economybegins to recover. The UK has lived with theharm caused by high pay inequality for far toolong, it is time to begin to reset the scales byincreasing pay at the bottom. ■


1 The title of the recent UK strategy document on childpoverty, see HM Treasury, Department for Work andPensions and Department for Children, Schools andFamilies, Ending Child Poverty Everybody’s business, 20082 CPAG, Child Poverty: the stats, analysis of the latestpoverty statistics, CPAG, 2008. See Table 5. The figuresoriginate from the official households below averageincomes series, and use the after housing cost measure. 3 L Harker, Delivering on child poverty what would ittake? Independent report for the Department of Work andPensions, The Stationary Office, cm 6951, 2006, p.38See Office for National Statistics, First Release: LabourMarket Statistics, February 2009, 11 February 20094 Department for Work and Pensions, Householdsbelow average incomes: an analysis of the incomedistribution 1994/95-2006/07, National Statistics, 20085 See M Evans and J Scarborough, Can current policyend child poverty in Britain by 2020? Joseph RowntreeFoundation, 2006, Figure 1.2

6 Low Pay Commission, National Minimum Wage, LowPay Commission Report, 20087 Most families with children are entitled to some childtax credit8 See CPAG, Tax credit consultation response, CPAG,2008. Available at www.cpag.org.uk9 see HM Revenue and Customs, Child Tax Credit andWorking Tax Credit take up rates 2005/06, 2008.10 See J Hills, R Smithies and A Mcknight, Trackingincomes: how working families incomes vary through theyear, CASE report 132, CASE, ESRC and HM Revenueand Customs, 200611 M Evans, S Harkness and R A Ortiz, Lone parentscycling between work and benefits, Department for Workand Pensions, Research Report 217, 200412 See the Monitoring Poverty and Social Exclusionwebsite, indicator 52 available atwww.poverty.org.uk/52/index.shtml

NOTES


Tackling low pay and in-work povertyfor single parents must not be seen as aluxury during a recession, but anecessity. The experience of single

parents all over the country demonstrates thatin-work poverty cannot simply be tackled bygreater working hours—families need anincome from employment that enables themto combine paid work with their caringresponsibilities.

Tackling low pay should be seen as part of ananti-poverty strategy that simultaneouslyoffers a stimulus to aid economic recovery byputting money in the hands of the poor whoare most likely to spend it. As Jason Furman,Economic Adviser to President Obama hasput it, “Putting money in the hands of the poorcan help reduce the severity of a recession. Andreducing the severity of the recession is the mostimportant step we can take to mitigate anyincrease in poverty”1 The government can startnow by setting an example and tackling lowpay across the public sector, insisting thatcompanies from whom it procures servicespay a living wage, and by resisting calls tohold down potential annual increases in theNational Minimum Wage.

Why care about single parents?

‘In work, better off ’ was the title of theGovernment Green paper aimed at increasingthe number of single parents in paid work inorder, in part, to reduce child poverty rates.2This consultation kicked off a legislativeprocess that will see all single parents withchildren aged seven and upwards subject tofull work search conditions from 2010, andthe current Welfare Reform Bill will ask those

with children aged three and upwards toprepare for work.

However, while most single parent familieswill be better off in work due to the belowpoverty line levels of benefit payments toomany will still not earn enough to escapepoverty; this is why 16 per cent of childrenwith a single parent working full time arepoor, as are 33 per cent of those whose singleparent works in a part time job.3 This meansthat 393,000 children with a working singleparent live below the poverty line.

The fact that single parents are a major targetof welfare reform, and that so many of thechildren of working single parents live belowpoverty, should be enough to provoke concernabout the consequences of low pay for thisgroup. Single parents demonstrate that inwork poverty cannot simply be tackled bygreater working hours – families need anincome from employment that enables themto combine paid work with their caringresponsibilities.

Lastly, single parents deserve our attentionbecause nine out of ten of them are women,and their employment is often concentratedin those sectors dominated by women, andhence by low pay. Single parents enteringwork following participation in theGovernment’s New Deal for Lone Parentspredominantly entered jobs such as catering,cleaning, care, retail, clerical, and hair andbeauty therapy.4 Tackling the gender pay gapand tackling low pay therefore go hand inhand; focusing on single parents againhighlights the urgent need for this action.


GingerbreadSingle parents,

low pay and povertyKate Bell

The impact of low pay on families

Working in a low paid job means having tomake difficult choices between employmentand caring for children—a dilemmaparticularly acute for single parents. A recentstudy has examined how this trade off wasmanaged in the lives of a group of singleparents who moved into work between 2003and 2007.

Whilst these women did feel that they werebetter off in work, many were still strugglingfinancially, with half feeling insecure in thisrespect. For many of the parents, their incomesfrom employment had been insufficient toavoid them having to go into debt, witharound half in this situation. These (and other)concerns had knock on effects on women’shealth, with thirteen out of nineteen women inthe third wave of interviews conducted by theresearchers experiencing stress or depression.

And while children were generally positiveabout their mothers’ moves into employment,they were often concerned about continuedfinancial instability, as well as the time theylost with their parent:

“For children whose mothers had enteredunstable employment or who had had difficultiessustaining employment the benefits [from work]were less evident, and the children, at that time,were very concerned about their financial wellbeing and debt and anxious about the process ofemployment generally….positive outcomes [frommothers’ paid work] were qualified by otherconcerns including time poverty and uneaseabout their mothers’ health and well-being”.5

Moving on up?

The conventional solution to dilemmas suchas these is often seen as contained in theconcept of ‘advancement’; women movingfrom low paid jobs to better paid jobs, oralternatively working longer hours. In thisscenario low pay is not seen as aninsurmountable problem providing it acts as astepping stone to a better-paid job.

However, for many parents, and particularlyfor many single parents, advancement is oftendifficult to achieve. Evidence that does existsuggests that earnings increases for single wasonly achieved through parents working longerhours. There was little sign of parents movinginto better paid jobs.6

This may partly have been due to the limitedtime for parents to take part in activities thatwould help them advance in work but, asMillar and Ridge’s research shows, the

opportunities to advance within low wagejobs are often extremely constrained.7Moreover, attempting the most effectivestrategy in this circumstance of changing jobrather than waiting for promotionopportunities8 is often difficult as job securityis particularly important to single parents, andthis may be a trade off that many areunwilling to make.

The problem of in-work poverty for parentscannot be tackled simply by asking them towork more or longer hours, or to upskill inorder to take higher paying jobs. As theevaluation of the Employment Retention andAdvancement Project found, “Lone parents’concerns about their children’s well-being werealways paramount.”.9 These concerns lead themto prioritise time with their children alongsidepaid work. A Government equally concernedwith the wellbeing of children must ensure thatall jobs, not just those which require high skills,pay enough for families to give their childrentime as well as financial support.

Falling back down?

If the type of jobs that single parents enterrestrict their ability to improve their wages,low wages themselves hamper their chances ofholding onto jobs. Single parents are morelikely to have problems retaining jobs thanother employees, and research has consistentlyshown that low pay is associated with movingback from work onto benefits in a low-pay-no-pay cycle.10


We can andmust do more andGovernment can startby setting an exampleand tackling low payacross the public sector,insisting thatcompanies from whomit procures contractspay a living wage.


Moves between employment and benefits canbe particularly damaging for families: researchinto Britain’s poorest children found thatthose in most hardship lived in families whichhad experienced one or more transitionsbetween work and benefits,11 There areserious concerns that the impact of therecession may be to see many more childrenexperiencing this downward transition.Childcare responsibilities may make it harderfor single parents to compete in a difficult jobmarket, and those facing the new obligationsto look for work are likely to be especiallyhard hit.

Online research with over 700 single parentsconducted by Gingerbread before Christmasfound that many were already struggling inthe downturn. 83% who answered the surveysaid it was harder to make ends meet this yearthan last, 79% had had to turn down theheating to help manage their finances, and39% had had to borrow money.12 Low paidsingle parents are therefore more likely to losetheir jobs, and having experienced low pay, beless likely to have built up savings that mayprotect them.

Ways forward

The problems linked with low-paid work areoften particularly acute for single parents. Andas a group vulnerable both to low pay, and therelated risk of job exit, the effects of thedownturn for low-paid single parents could besevere, with knock on consequences for theirchildren

In normal times taking urgent and active stepsto increase the number of single parents injobs that pay a decent wage should be apriority. In a recession it is a burning necessityin order to offer shelter to those single parentfamilies suffering from low-paid work andworking poverty and provide the economywith the demand stimulus that would flowfrom putting money into the hands of thosewho are most likely to spend it. We can andmust do more and Government can start bysetting an example and tackling low pay acrossthe public sector, insisting that companiesfrom whom it procures contracts pay a livingwage, and resisting calls to hold downpotential annual increases in the NationalMinimum Wage. ■

1 from ‘Fiscal Stimulus and Poverty’, Pathways, StanfordUniversity, Summer 20082 DWP (2007) In work better off: next steps to fullemployment http://www.dwp.gov.uk/welfarereform/in-work-better-off/ 3 DWP (2008) Households Below Average Income 1994/5to 1996/7http://www.dwp.gov.uk/asd/hbai/hbai2007/chapters.asp 4 Evans M et al (2003) New Deal for Lone Parents:Second synthesis report of the national evaluation DWP. 5 Millar J and Ridge T (2008) Work and well-being overtime: lone mothers and their children DWP ResearchReport No. 536. 6 James A. Riccio, Helen Bewley, Verity Campbell-Barr,Richard Dorsett,Gayle Hamilton, Lesley Hoggart, Alan Marsh, CynthiaMiller, Kathryn Rayand Sandra Vegeris (2008) Implementation and second-year impacts for lone parents in the UKEmployment Retention and Advancement (ERA)demonstration DWP Research Report No. 489. 7 Millar J and Ridge T (2008) op cit note 6.

8 Fredrik Andersson, Harry Holzer and Julia Lane(2004) Moving up or moving on; Who advances in the lowwage labour market Russel Sage Foundation. 9 Riccio et al (2008), op cit note 7. 10 See Susan Harkness chapter in Bell et al (2006)Staying on, stepping up; how can employment retention andadvancement policies be made to work for lone parents?One Parent Families.11 Adelman L, Middelton S and Ashworth K (2003)Britain’s Poorest Children: Severe and persistent poverty andsocial exclusion Save the Children. The update of thisresearch also found that During 1994-2002, about two-fifths of children in persistent and severe poverty (42 percent) or in short-term severe poverty (40 per cent) werefrom households with at least two transitions betweenwork and no work, compared to only 14 per cent of allchildren from such households. Magadi M andMiddleton S (2005) Britain’s poorest children revisited:Evidence from the BHPS (1994-2002) CRSP ResearchReport 3 Save the Children. 12 Gingerbread (2009) Standing up for single parentsagainst poverty and prejudice see

NOTES



The business of caring provides a perfectcase study of the problems of endemicand enduring low pay. These problemswill be exacerbated as the recession

squeezes care funding and care providers lookto reduce costs even further.

The current economic crisis however can’tbe allowed to disguise the need for long-term, radical solutions. Care is an issue thatwill dominate our society over the comingdecades as our population ages, increasingthe demand for care particularly for peopleliving longer with dementia and disabilities.The question of how care is properlyfunded will attract growing public debatefollowing a green paper due to be publishedin spring 2009.

The social care workforce in Englandaccounts for about 1.5 million people,working in people’s own homes, care homes,day care settings, hospital and the widercommunity. And it’s growing in size.

Eldercare is still mainly a women’s issue –carried out by women for other women, withlow paid professional carers or unpaid carerslooking after other women, many living onlow fixed incomes without proper pensionprovision themselves. The care workforce isnot only predominantly female but it is alsoageing. Caring is still seen as low status workand surveys consistently suggest it is under-valued as well as under-funded.

Over three-quarters of care staff work forapproximately 25,000 employers in theprivate and voluntary sector. The remainderwork in the statutory sector, mainly for localcouncils.

There is a considerable disparity in pay andconditions between the two groups – thoseworking in local authorities generallyexperience better wages and pensions and areunionised. In the private and voluntarysectors the workforce is fragmented andunder-represented, with the vast majority paidat or just above the minimum wage. There is ahigh level of staff turnover, particularly in carehomes, and many care workers have low levelsof qualifications. The sector has reliedincreasingly on migrant workers to maintain

Counsel and CareWho cares? Low pay and the cost of caringStephen Burke

the problems ofendemic and enduringlow pay’


services across the country. And there are highlevels of vacancies despite risingunemployment because the work is not seenas attractive or properly rewarded.

The demographic shifts will require the careworkforce to develop substantially – both innumbers and skills - to grow capacity andcompetence. At the same time with theadvent of direct payments and personalbudgets, an increasing number of personalassistants are being employed directly byalmost 200,000 service users and are workingin new ways.

The Department of Health is currentlydeveloping an Adult Social Care WorkforceStrategy to tackle these big issues. While thedraft strategy is full of plans to developskills, training, career pathways and‘workforce remodelling’, it is almost silenton pay and funding.

The current squeeze on funding of care bycouncils will make these two related issueseven more acute. Local authorities arecontinually tightening their eligibility criteriafor home care services, meaning that fewerolder people qualify for council help in theirown home. At the same time councils aresqueezing the fees they pay for care homeplacements.

As reported to Counsel and Care’s adviceservice, these pressures mean more olderpeople are having to find and pay for theirown care themselves, increasingly purchasingsupport from private providers. This is arecipe for further downward pressure onwages which are already set at or just abovethe minimum wage.

Alternatively, more and more older people willrely on family carers for support. Many ofthese carers are also women on lower incomes,aged 45-65, and they may be forced to give

up work or retire early to be a full-time carerwith inadequate financial support themselves.

The forthcoming green paper on care fundingtherefore presents government and societywith a huge challenge. The only way toresolve this massive social issue will be asubstantial injection of public funding tosubsidise the supply of care services and bettersupport for family carers, along with acampaign to raise the public status of theworkforce and the value attached to caring.This approach has helped tackle some, if notall, of the low pay issues facing the childcareworkforce over the last decade.

It would also help if care providers were totake a lead on raising pay to at least livingwage levels. There is anecdotal evidence frommainly voluntary sector providers with betterinspection ratings that good quality servicesare linked to better pay and lower staffturnover. Counsel and Care and the NationalCare Forum are researching this further tomake the case for greater investment.

Our ageing population means we are fastreaching crunch point. It’s time for action onthe pay and status of carers working witholder and disabled people. This is an issue thataffects all of us, either as a user of care servicesor as a carer ourselves, if not today then verysoon. ■

Stephen Burke is Chief Executiveof Counsel and Care, the national

charity working with olderpeople, their families and carersto get the best care and support.

www.counselandcare.org.uk



I t remains unclear what will happen toemployment opportunities for studentsas the recession bites and as overallunemployment figures grow. However,

our experience at NUS tells us that, evenbefore the credit crunch, students veryoften found themselves in insecure andvulnerable employment in which they wereunfairly treated.

It seems paradoxical but now is precisely theright time to tackle the culture of vulnerable andlow-paid employment, and to put the economyon a surer footing to ensure that employmentpractices and pay are both fair and sustainable aswe look, in hope, towards recovery.

Students at work today are engaged in a threeway balancing act between work, study andlife. Part time work is widespread amongst full-time students in both further education andhigher education. Joint NUS and HSBCresearch on the student experience from 2008shows 75 per cent of students undertake paidemployment while at university1. 46 per centof those who work rely on paid employment tofund their basic living expenses2. As the costs ofaccommodation, the costs of living, and thecosts of education itself have risen, more andmore students have come to rely on part-timeemployment in order to make ends meet.

Joint NUS and TUC research from 2006showed nearly two thirds of employed highereducation students were employed in, retail,hotels, bars and restaurants3. These areemployment sectors which offer employmentconditions that often fit in with student studypatterns: flexible shift based work, eveningand weekend hours and a low skills thresholdfor recruitment.

For those full-time students employed inother sectors such as health and social care,administration and construction, themajority are employed through employment

agencies, many of whom who specificallytarget student workers for low-paid roles withlimited employment rights. Studentemployment is principally in sectors that havealready been hit hard by the recession, andwith few rights to speak of, there is a dangerthat students are both easily dispensable andvulnerable to exploitation.

Employment while studying is also a necessityfor those who study part-time in highereducation, which stands at more than 40 percent of total student numbers; indeed this isoften the very reason for individuals opting topursue this type of study. The rising costs ofeducation have inevitably been a factor in thesteady expansion of part-time study, whichoften leaves students juggling part or full-timejobs and caring responsibilities alongside theirstudies.

Those studying in further and highereducation have also inevitably become richpickings for employers seeking to expand their

NUSCreating a fair pay cultureAma Uzowuru, Vice President (Welfare)

It may seemparadoxical but now isprecisely the right timeto tackle the culture ofvulnerable and low-paid employment, andto put the economy ona surer footing.


range of insecure and low-paid work.

For instance, through the exploitation of thecurrent structure of the national minimumwage, employers can employ young people to dothe same work for less pay. Those aged between18 and 21 are eligible only for the developmentrate of the minimum wage, which at £4.77 perhour is nearly a full pound less than the standardrate. Meanwhile, those aged under-18 areeligible for just £3.53 an hour and those under18 who are part of the Government’s flagshipapprenticeship programme do not qualify forthe minimum wage. These are the facts butbehind them lie many stories of young peopletrapped in vulnerable employment, struggling tomake ends meet.

This unequal minimum wages compoundsworkplace age discrimination and, in effect,legitimises it. It also provides a disincentive tothose more enlightened employers who take along-term view, cultivating and properlyrewarding their employees. Those employeeswill often reciprocate with loyalty, motivationand career development. In short, therecruitment and retention problems associatedwith high staff turnover can be tackled by theadoption of a different approach that putsemployees on a new footing.

NUS believes that the national minimumwage has made a significant difference to thelives of many thousand low-paid workers. Butit is now, during this recession, that we shouldbe looking optimistically about rebuilding astronger, more sustainable labour marketwhere workers are supported and developed.This would not only be a positivedevelopment for those students and graduateswho currently face an uncertain future, butwould have benefits for employers to developand motivate their workforce and sew theseeds of economic recovery.

There are other reasons why cultivatingemployees who are also students is of benefit toemployers. When those students complete theircourses they are more employable. If their parttime employer has treated them well, thatindividual is more likely to look to furtheropportunities with that employer. Not only dothese enlightened practices benefit therelationship between employer and individual,but they also improve the standing of theemployer within their communities and amonga wider range of potential future employees.The personal views transmitted from parent to

student, graduate to student, and student tofellow student are significant factors in futurechoices for those leaving education, not tomention in their future consumer behaviour.Those companies who treat employees wellbenefit from the associated esteem and find aqueue of talented people willing to use theirservices or to work for them.

There is a strong argument that these changesmust begin with and in education. The agesbetween 16 and 21 are for most the bridgebetween school education and full-timeemployment. It is during these stages weregood practices should sprout and grow,offering a new deal for the employees of thefuture rather than a cynical and short-termattitude to employment.

Yet too many current employment practicestake a narrow perspective, cultivating anattitude of cynicism and low aspirationamong students and young people. Jobs thatwere once full-time and reasonably paid haveincreasingly been replaced by casual,temporary posts, working for contractors oragencies, and without union representation.As graduate recruiters slash the number ofplaces on their schemes, there is a danger thata generation of graduates, saddled with debt,will become alienated once they have lefteducation and surveyed the opportunities theyare presented with. If employers are not moreenlightened about the way in which they treatthose in education, it will be those studentsand graduates who will work together tocreate the fair and sustainable employmentopportunities they have been denied.

It will be the cynical and short-termistemployers who will lose out in the end. Butthose employers who remain ahead of thecurve and realise the huge benefits thatmotivating and developing their workforcewill benefit in the long term. ■

1 NUS/HSBC, Student Experience Report 2008http://resource.nusonline.co.uk/media/resource/Students%20FINAL%20REPORT%2019%20Nov%2008%20Final1.doc2 NUS/HSBC, Student Experience Report 2008http://resource.nusonline.co.uk/media/resource/Students%20FINAL%20REPORT%2019%20Nov%2008%20Final1.doc3 NUS/TUC, All Work Low Pay, 2006http://www.tuc.org.uk/extras/allworklowpay.pdf

NOTES



It is easy to believe that the recession hasmade it even harder to win the fight forfair pay. At a time when tens of thousandsof people a month are joining the dole

queues, “you are lucky to have a job at all!”sounds all too reasonable. And the sense ofguilt that that phrase can provoke probablydoes more to deflate a campaign for fair paythan any direct opposition to it ever can.

For sure, high and rising unemploymentdoes nothing for the chances of winning afight for fair pay. The truth of the matter,though, is that unemployment in the UK hasbeen rising since 2004. Before the recessioneven began last summer, it had gone up by athird of million from the low point. Thatthe fight for far pay is hard and gettingharder is nothing new.

What the recession is doing is changing thegame. That this change contains manythreats is not in doubt. Just because the stateis going to be much more involved indirecting economic activity than it has beenfor almost a quarter of a century is not initself any guarantee that things will be better.At the time of the miners’ strike, coal was anationalised industry.

But the recession also shows things that ifgrasped can help the fight the fair pay. One of these is that some of the fetters thatseemingly bind low paid workers are not realat all. Another is that workers, and pay, arenot to blame. Perhaps most important ofall, although rising unemployment is adisaster, it is at least a disaster that is nowout in the open.

Money is not a problem for thepublic sector as a whole

The most important fetter binding low paidworkers is the simple idea that fair paycannot be afforded. For certain, ifemployees are to be paid fairly, more moneywill be needed. Yet in its response to therecession, central government has shownthat when it is deemed necessary, finding themoney is not a problem.

It is not the eye-watering sums that have beenused to recapitalise the banks that are relevanthere. In many ways, what is involved here is akind of funny money, just as the tens or evenhundreds of thousands needed to buy theaverage house seems like funny moneycompared with earnings.

Instead, it is the huge increase in the amountof money that the government has to startborrowing to balance its books month bymonth.

So a year ago, before it all went wrong, thegovernment was expecting to borrow around£40 billion in 2008/09. Now, however, theactual figures is expected to top £80 billion.Meanwhile the forecast for next year exceeds£120 billion.

The point about these truly enormousincreases is not that we can have howevermuch money we want without anyconsequences. That obviously cannot betrue. There will certainly be consequencesfor many years to come as a result of thesehuge increases. But what it does show is

NPI Fair Pay: What is positiveabout the recession?Peter Kenway, Chief Executive


that the public sector is not constrained bymoney in the way that a private individualor firm is.

So if central government says there is nomoney for something like fair pay, that is achoice it is making, not a hard necessity.Which means that if they were so minded, itcould make a different choice.

In the case of fair pay, there is a second point:from the point of view of the public sector asa whole, the amount of money involved issmall. So for example, suppose it was decidedto increase the pay of one million low paidfull time workers by £1 an hour. Over a year,how much would that cost? Answer, about£2 billion pounds. Is that a large sum ofmoney? Given that the government isovershooting its budget at the moment by £3billion a month, obviously not.

And that £2 billion is before deductions forincome tax and the like – so the net cost tothe public sector as a whole is much lessthan this.

So in the case of an employee whose familyis not receiving tax credits (except perhapsthe almost flat family element), thegovernment takes 20 pence in income taxand 11 pence in national insurance from theemployee. In addition, it also takes almost13 pence from the employer. Putting allthat together, for every £1 paid out by theemployer, 40 pence goes to the Treasury and60 pence to the employee.

Meanwhile, for someone whose family isreceiving tax credits, the government’s take is

actually much larger. For the way that taxcredits work is that for every extra £1 of grossincome, tax credits are reduced by 39 pence.As a result, for every extra £1 paid by theemployer for this work, no less than 73%finds it way to the Treasury.

Now as a rule, low paid workers are morelikely to be receiving tax credits than others.Without knowing all the details about eachemployee’s family status (especially how muchtheir partner earns and whether they havedependent children), it is impossible to sayexactly how much. But a good rule of thumbwould be to say that the government, in theshape of the Treasury, gets back about half ofwhat the employer would have to pay out toprovide fair pay.

This is the point to impress upon other publicsector employers, for example, in localauthorities or the health service: if they needmore money in their budgets to pay a fairwage, they should be getting a minimum of ahalf of what is needed from centralgovernment since that is how much centralgovernment, in the shape of the Treasury,makes from fair pay.

It should be stressed: these are arguments thatare true at any time; it is just that therecession helps make it clear that money, afterall, is not the problem.

‘High’ wages are not the problemfor the private sector

This argument applies no less to private sectoremployees working for firms who areproviding services to the public sector since


‘Unfair’ pay, whetherin the public or privatesector, is not part of thesolution.

their money too ultimately comes from thegovernment. . But for other private sectoremployees, it does not work. There is nodoubt that in general, the recession hitsprivate sector employees much harder thanthe public sector ones.

In which case, what opportunity does therecession offer here? The answer is that itshows that jobs can be lost for reasons quiteother than the fact that wages are ‘too high’ –and that it would therefore be quite wrong torespond to the recession by agreeing to putoff, or even withdraw, fair wage agreements.

It is very understandable that when facedwith the threat of losing their job, peopleshould cast around for ways in which theycan ward off that evil event. Agreeing to paycuts is something that employees are in aposition to do.

But the truth is that in general, that is notgoing to help. It is true that if one firm cancut pay, and therefore prices, it might be ableto steal a march on its rivals by grabbing abigger share of the market. But if that were tolook like a successful strategy for one firm,competitors would surely follow suit. Inwhich case, the net result would be almost asmany job losses as before – and lower pay allround.

Conclusion

There is little room for optimism about therecession. There were improvements for lowpaid workers and low income families in theearly years of this decade but things soonstarted to drift away again. Nothing betterillustrates this than the fact that ‘in-workpoverty’ as measured by the number ofchildren in working families with disposableincomes below the official poverty line,reached an all time high in 2006/07 (thelatest figures). If the gains in the good yearswere so paltry, the prospects for the lean yearsare grim indeed.

Yet one good that may come from therecession is if it helps change perceptions.Unemployment is not just something thatused to happen in the past. Finding themoney for fair pay is not a problem for thepublic sector as a whole. ‘Unfair’ pay,whether in the public or private sector, is notpart of the solution. If campaigns for fair payare to have a chance of success in the next fewyears, they need to find ways of taking thetruths on board in their campaigning. Andthey need to link up: unfair pay is not anisolated problem. ■



Over the past decade the presence ofmigrants has grown to 10% of theUK labour force. Mostauthorities attribute broadly

positive benefits coming from migration overthis period, with foreign-born workersoffsetting the declining rate of economicactive on the part of British citizens as morenatives reach retirement age. Thegovernment’s own calculations suggested thatin the period 2001-06 migrants added £6billion to economic output; around the sameas the contribution coming from the UKagriculture and fishery sectorsi.

However, trying to determine the effect ofmigration on a national economy during aperiod of recession is proving more difficult.Questions arise as to what trends are beingreinforced by the presence of migrants, andwhat the behaviour is of the migrantsthemselves as they adjust to difficult times.ii

Economic theory predicts that, just asmigrants permit adjustment to conditions ofrelative labour scarcity during boom years,and allow wage growth to be contained atnon-inflationary levels, so during downturnsthey will withdraw from the labour market toreturn home and thereby reduce downwardpressure on pay and conditions. Using thisapproach some optimists have argued thatreturn migration will allow unemployment topeak at 2 million rather than rise todangerously high levels of 3 million andabove.

Whilst there is evidence that the levels ofmigration between countries like the UK andPoland are in decline, people observing trends

much closer to the level of migrant activity aremore sceptical that matters will be quite thisstraightforward. In recent contributions to a‘virtual discussion’ on women and migrationorganised by the United Nation’s INSTRAWagency activists working with migrantdomestic workers set out trenchant argumentsagainst large-scale return migration based onthe fact the current predicament is that of aglobal recession, with sending countries beinghit as hard, or harder, than the regions ofdestination. Domestic workers, who losetheir jobs because of cutbacks to the childcareand housework budgets of cash-strappedmiddle class professionals, are unlikely toeasily contemplate a return to countries likeUkraine or the Philippines in thesecircumstances.

The example of Spain might provide a goodindication of what the UK can expect tohappen as the recession bites more deeply.With a higher proportion of non-EUnationals in a labour force which hascontributed significantly to high economicgrowth rates over the past decade, the Spanishauthorities have offered grants in the region of€10,000 to its large North African and LatinAmerican to persuade them to return abroadat higher rates. To date the take up on thisoffer has been modest, with most migrantsdeciding to hunker down in the expectationof a few bad years rather than return home atthis time.

This might not be a wholly irrational way togo about things. From the ground-level viewof migrants the recession looks bad, but notunremittingly so. A significant differencebetween the UK economy in 2009 and the


MRNMigrant workers in a

period of recessionDon Flynn, Director

other periods of downturn is its diversificationinto a range of niches which subdivide almostevery sector of manufacturing and service.Whilst ‘big ticket item’ retailing has slumpedmassively over the winter, sectors like the‘pound shop’ franchises, where immigrantentrepreneurship has been traditionallystrong, are reported to be doing excellentbusiness. Recessions are, after all, periodswhen firms strive to reduce costs to stay inbusiness, and the use of highly flexible andexploitable migrant labour is certainly oneway to put a cap on wages.

But migrants bring more to the labour marketthat a preparedness to work for lower wagerates. Many studies in recent years have shownmigrant communities to contain a higherstock of well-educated and entrepreneurially-minded people than is found amongst thehost community. As times become harder forBritish employers it might be expected thatsome at least will lower previous prejudicesagainst the employment of people withprofessional qualifications gained abroad totake on them onto their payrolls. The factthat something of this sort is happeningmight be behind the statistics which soembarrassed the government in February,showing that the proportion of foreignworkers employed in Britain has increased by175,000 during the early period of therecession, rather than declined as so many hadpredicted.iii

The general picture then is that, even during aperiod of severe recession, it will probably bethe case that the UK economy will stillpresent opportunities for migrants to findemployers who want to want to employ themand that the option of returning abroad willtherefore appear not so greatly attractive.However, we should certainly anticipate that apart of this survival strategy will involvedownward pressure on wages and conditionsand hence a rise in remuneration at below fairpay levels. But this is not unique to migrantsand it can be expected that many Britishworkers will find themselves in jobs in themonths ahead working for wages they wouldnot have considered even a year previously. Ifthe prevalence of low pay is greater amongstmigrants this is largely due to their greatvulnerability in the labour market, rather thanan innate predisposition to settle for less.

The important question which thereforeneeds to be asked is why are migrants in amore vulnerable position in the labour marketthan their British counterparts, and what canbe done to redress this situation? In puttingthe matter this way there is continuity for the

work commenced by the government’sdepartment for Business, Enterprise andRegulatory Reform (BERR) and the TradesUnion Congress on the Vulnerable WorkersEnforcement Forum and the Commission onVulnerable Employment (CoVE). Thepicture that emerged from evidence submittedto CoVE was of workers disproportionatelyconcentrated in sectors which trade unionsconsidered hard to organise, where employersdemanded high levels of flexibility, and wherethe employment contract was more likely tobe mediated by gangmasters and other typesof employment agency arrangements. Aconsiderable check to the vulnerability ofmany migrant workers would therefore comefrom relatively simple measures aimed atbetter regulation of the sectors where theywere present as a sizeable segment of theworkforce, and for a strengthening of the roleof trade unions in representing their collectiveinterests.iv

If this seems a simple and straightforwardapproach to the problem of migrants asworkers susceptible to being lower paid it islikely to be made more complicated by a lotof the politics which surrounds the business ofmigration. From the standpoint of the maingovernment department responsible for theissue, the Home Office, the point is not thatmigrant workers should be better protectedfrom greater exploitation during a period ofdownturn, but that they should follow thepredictions of classical economy theory andgo home. The immigration minister, PhilWoolas, has stated that the virtue of themanaged migration system the governmenthas put in place since 2002 is that it has thecapacity to limit the numbers of migrantsentering the UK when the economicindicators suggest there is low demand, and touse greater powers of enforcement to identifyand remove those who are now consideredsurplus to requirements.v Measures aimed atimposing substantial fines on employersfound employing migrants withoutpermission to work in the UK are a key partof this enforcement strategy.vi The effect ofsqueezing migrants out of the labour marketis expected, in the word of a Home Officestrategy paper, to create situation in whichconditions of life become intolerable andpeople return abroad voluntarily.vii

This is essentially a vision of a world in whichmigrants are a tradable resource the supply ofwhich can be increased or reduced inaccordance with market demand. It is ironicthat this condition is approached most closelyin conditions of minimal migrationregulation, where the cost of movement across



from frontiers is limited to the expense of theair, train or bus ticket. Consistent with thisviewpoint, migration from the countries ofthe EU probably has proven more sensitive toeconomic realities of recession, with morePolish, Czech, Lithuanian and other new EUnationals deciding to go home and wait forbetter times there. Non-EU migrants on theother hand, lumbered with greater costs at theonset of their move and facing a higher pricein returning and giving up the residencepermits they have worked hard to obtain, willcling on by their fingernails of necessary tothe prospect of any sort of a job in thecountry of destination.

So, without a political intervention designedto redress the disadvantages migrants strugglewith in competitive labour markets byguaranteeing equal status in the workforce, weseems safe to predicate that they will sufferduring a recession alongside other vulnerableworkers. Struggling with the high historiccosts of their original migration it is difficultto believe that they will be easily reconciled tothe prospect of a return home with very little

to show for their years abroad. But we canexpect, if a progressive approach to theamelioration of conditions of poor wages andworking conditions to emerge fromgovernment and social movements like thetrade unions in the near future, that migrantswould be as committed as any other section ofthe workforce to fighting exploitation andunfair wages. ■

1 DWP submission to HL Inquiry2 Reference IPPR position3 ‘Statistics chief Karen Dunnell inflames row overforeign workers’ The Times February 12th 2009.http://www.timesonline.co.uk/tol/news/politics/article5712634.ece4 Reference the CoVE report.5 Insert suitable quote.6 See ‘Papers Please’ report7 Reference ‘Enforcing the Rules’.

NOTES



Q1) With the UK now formally inrecession many individuals andfamilies across the country arefacing material hardship. Manyhouseholds that include one ormore low-paid workers face apossible descent below the povertyline as a result of job losses withinthe household or a decrease intheir own hourly earnings? Beyondthe floor provided by the NationalMinimum Wage what is yourparty’s agenda for the low paid?

JJoonnaatthhaann DDjjaannooggllyy MMPP::Conservatives support the NationalMinimum Wage. Attitude, experience andskills are key components of careerprogression. And with career progression,comes wage progression. The motivation toclimb the career ladder and the willingness tolearn from experience are two things each andevery individual can find in themselves. Butthe provision of skills is an area of sharedresponsibility, between individuals andgovernment. That is why Conservatives arefocusing on community learning, creating astreamlined funding model where governmentsupport for training follows the learner, andhave pledged a massive expansion in theprovision of real apprenticeships, creating100,000 additional apprenticeships every yearand making it easier for companies to runapprenticeships.

JJoohhnn TThhuurrssoo MMPP::Liberal Democrats believe that those on thelowest income will be hardest hit by therecession. We believe that removing thelowest paid from taxation is the most effective

way both of helping people on modestincomes and on helping to stimulate theeconomy. This could be done by lowering thebasic rate of income tax or by raising personalallowances or a combination of both.

PPaatt MMaaccFFaaddddeenn MMPP::The national minimum wage forms part ofthe Government’s wider strategy for tacklinglow living standards and, because peoples’circumstances vary, it should be seen inconjunction with other measures foralleviating poverty. The NMW complementstax credits in achieving fairness combinedwith flexibility in the labour market andtogether with the Working and Child TaxCredits, from April 2009 the NMW willguarantee that every family with one childand one person working 35 hours a week willreceive a minimum income of £304 per week;this is compared to £182 in 1999, when theNMW was first introduced.The government have also announced furtherreforms in the last year that will providesupport to families both with children andwithout children. These include:■ A permanent increase to personal tax

allowances by £600 above indexation withan increase of a further £130 aboveindexation in 2009-10 and 2010-11,together worth £145 for a basic ratetaxpayer;

■ A reduction in VAT of 2.5 percentagepoints from 1 December 2008, which willbenefit families, on average, by £275 a year

■ An increase to the support for MortgageInterest (SMI) to better help people meetthe interest payments on their mortgageand reduce the waiting time before helpfrom SMI is available; and

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■ A new £1 billion package of energyefficiency measures, including at least 50%off a range of energy saving measures forall households.

So as a result of this Government’s reforms topersonal tax and benefits, on average, a two-earner couple without children both workingfull-time on half-average male earnings (£16,650 a year) will be better off by £375 a year,in 2009-10 compared with under the tax andbenefit system for 1997-98.

Q2) While the National MinimumWage has been an essential tool inthe forging of a fairer labourmarket it has not affected theactual incidence of low pay in thatlabour market and consequentlyhas not impacted on the levels of‘working poverty’ in Britain. Doesyour party acknowledge that thehigh incidence of low-paid work inthe UK—affecting approximately5.3 million people or over a fifth(23 per cent) of all employees inthis country—is a problem in itselfand a core contributory cause toUK poverty levels?

JJoonnaatthhaann DDjjaannooggllyy MMPP::The key underlying drivers of deep, cross-generation poverty are a lack of skills and lackof education. These present barriers toemployment, which in turn results in poverty.They contribute to working poverty becausethey prevent career progression and, in someinstances, result in just one half of a couplesupporting the entire family if the other is outof work.

JJoohhnn TThhuurrssoo MMPP::Yes.

PPaatt MMaaccFFaaddddeenn MMPP::The NMW complements tax credits inachieving fairness combined with flexibility inthe labour market. The minimum wage andtax credits together will mean that someoneworking full time with one child will actuallyhave a minimum income per hour worked ofover £7.45. Furthermore, as a result of directtax and benefit measures introduced since1997, in 2009-10, in real terms, those in thebottom quintile are £2,600 a year better off.

Q3) International comparisonssuggest that the incidence of low-paid work in the United Kingdomis still one of the highest in Europe.In 2005 an estimated 22.1 percentor 1 in 5 employees in Britain fellbelow the low-pay threshold. Thiscompares to 17.6 percent in theNetherlands in 2005, 12.7 percentin France in 2002, and 8.5 percentin Denmark in 2005. Does yourParty aspire to reduce thecomparatively high proportion oflow-paid work in the UK labourmarket?

JJoonnaatthhaann DDjjaannooggllyy MMPP::Conservatives are clear that all employeesdeserve to be remunerated fairly for their hardwork and commitment. However, I am waryof damaging British competitiveness, to whichour flexible labour market makes such acontribution, especially in these difficulteconomic times. Competitiveness is a keyconsideration of the Low Pay Commission,alongside social considerations and the impactof the National Minimum Wage on the widereconomy. Ultimately, the provision of greaternumbers of better paid jobs can be related tothe creation of a competitive environmentwhich attracts companies to provide betterpaid jobs. The role of government is tomaintain such an environment and ensurethat the workforce have the appropriate skillsto carry it out.

JJoohhnn TThhuurrssoo MMPP::Liberal democracy is based on the coreconcept of fairness. We believe that theincidence of working poverty in Britain isunacceptably high and we certainly aspire toreduce the proportion of low paid work in theUK, partly through the fair tax policies andpartly through investment in education andskills, and investment in higher technologyand a greener future.

PPaatt MMaaccFFaaddddeenn MMPP::The Government aspires to combine socialjustice with economic prosperity, currentlyproviding real help to businesses andindividuals in this time of economic hardship.We have improved the quality of work byestablishing decent minimum standards in theworkplace and tackled unfairness byaddressing discrimination and barriers toprogression. The Government wants to seepeople paid a decent wage, which is why thenational minimum wage was introduced, andwe aim to help individuals achieve theirpotential through employment.



If your party does aspire to reducethe proportion of low-paid jobs inour economy how would agovernment formed by your partybegin to utilise the space providedby the current economic crisis tobuild a fairer labour market for thefuture?

JJoonnaatthhaann DDjjaannooggllyy MMPP::In the immediate, by moving away from aculture of rewarding failure at the top, to oneof responsibility at all levels. But some of thisresponsibility falls to those at the lower end ofpay scales too. We aspire to successfullyupskill our workforce and to help people takethemselves up the career ladder. We recentlypublished a Green Paper entitled The LowCarbon Economy, setting out our vision for aneconomy based on high-tech green industry,not just a finance and banking boom. Itenvisages thousands of new jobs in greenindustry – which will be challenging, skilledbut rewarding. It is also important not toremove existing jobs in the economy byloading further regulation on to companies.

JJoohhnn TThhuurrssoo MMPP::The downturn in the economy offers anopportunity to redirect which is not possiblewhen the economy is growing rapidly.Government undertakes considerableinvestment. These investments need to bestrategically targeted in order to help persuadecompanies to invest in upskilling andinfrastructure, particularly with regard toenvironmental issues. It also offers anopportunity to move away from a financialservices based economy to an economy basedon real needs and services and to rebalancereward away from speculative towards wealthcreation. In addition it is a time whenGovernment can encourage learning andskills. Taking all of these points together withthe tax changes mentioned above will help tocreate a different culture and labour marketthat is more just for the lower paid.

PPaatt MMaaccFFaaddddeenn MMPP::As set out in Ending Child Poverty: everybody’sbusiness, Government is committed to helpingparents stay and progress in work. TheGovernment is establishing a universal adultadvancement and careers service in Englandwith the potential to help every member ofsociety get on in their learning, work andcareers. Key aspects of the new service will betrailed over the next two years and the servicewill be fully operational from 2010/11. Accessto advice on overcoming the full range ofpotential barriers that people face in taking up

learning and progressing in work will be a keypart of the offer to individuals through theservice.The Government is also committed tohelping people stay in work and progress inthe labour market and the Government hastaken steps to promote progression inemployment by improving the integration ofemployment and skills, as outlined in theLeitch Review of Skills, which sets out aframework through which the issues ofsustainability and progression in work can beaddressed. If we are to tackle-in-work poverty it isimportant that we build on our success ingetting people into work by helping them stayin work and progress in their jobs.From autumn 2008 aspects of the newintegrated employment and skills service willbe tested through Jobcentre Plus and the adultadvancement and careers service. This newservice will offer employment related skillssupport to parents and others, helping themto develop the skills they need to positivelyinfluence their employment prospects andenable them to actively participate in thelabour market.

Would a Government formed byyour party at the next election aimto maintain the ‘bite’ of thenational minimum wage i.e. thevalue of the hourly NMW rate inrelation to median hourly pay?Furthermore, do you agree that itwould be a mistake—both forgeneral economic demand and forworking-families themselves—tohold down or postpone anyincreases in the national minimumwage as suggested recently by theBritish Chambers of Commerce?

JJoonnaatthhaann DDjjaannooggllyy MMPP::Conservatives certainly have no plans toabandon the National Minimum Wage. Todate, the Low Pay Commission has done anadmirable job of balancing the manycompeting factors that influence the actualMinimum Wage rates, and a ConservativeGovernment would continue to be guided bytheir recommendations.

JJoohhnn TThhuurrssoo MMPP::It would certainly be a mistake to hold downincreases in the national minimum wage.Equally it would be a bad time to agree toincrease the minimum wage by more thanthat which the economy can bear.

PPaatt MMaaccFFaaddddeenn MMPP::The Government is not in a position tospeculate on what the 2009/2010 nationalminimum wage rates should be until we haveheard from the Low Pay Commission whowill make their recommendations in thisrespect on 1 May 2009. The Government willthen consider and respond to the Low PayCommission’s recommendations.

According to a study produced in2006 a typical employer will onlyget inspected once every 330 yearsin regards to compliance withnational minimum wagelegislation. What would agovernment formed by your partydo to ensure the resourcesnecessary to properly enforce thenational minimum wage?

JJoonnaatthhaann DDjjaannooggllyy MMPP::The National Minimum Wage makes animportant contribution to social justice in theUK. Consequently, we have been calling forbetter enforcement of the National MinimumWage for some time, and supported therelevant provisions in the Employment Act2008. But I am not convinced that excessiveinspections, paid for by the taxpayer, are adesirable way forward. Small businesses, inparticular, labour under a vast burden ofregulation which can harm nationalcompetitiveness and stifle job creation. This isnot the same as de-regulating banks – there isclearly a big difference between helping smallbusiness owners (many of whom are low paid)and preventing excesses in the financial sector.In the first instance, therefore, a combinationof education for employers and targetedinspections – towards those who have hadcomplaints made against them or that operatein sectors with high incidences of low pay –offers a sustainable way forward.

JJoohhnn TThhuurrssoo MMPP::It is clear that the majority of employers inthe UK obey the national minimum wage.However the evidence shows a significantnumber of businesses which do not evenattempt to stay within the law. Thesebusinesses often share common characteristicsboth in terms of industry sectors and location.A Liberal Democrat government would lookto target abuse of the system by specificcompanies and seek to eliminate as muchabuse as possible.

PPaatt MMaaccFFaaddddeenn MMPP::The continued success of the nationalminimum wage is largely dependent on itseffective enforcement. It is important,therefore, that compliance is policedeffectively and non-compliance is dealt withrigorously. We do not believe thatunderpayment of the national minimum wageis acceptable and are therefore seeking to senda strong message which will change thebehaviour of potentially non-compliantemployers.



The Employment Act 2008 introduces a seriesof measures which will strengthen theenforcement regime of the national minimumwage. From 6 April 2009 employers will face anautomatic penalty of up to £5,000 if HMRevenue & Customs (HMRC) discover theyhave failed to comply with national minimumwage law. The most serious cases will be triedin a crown court and will be subject tounlimited fines. In addition to this workerswill be entitled to have arrears of wages repaidat current rates. The Act also gives HMRCcompliance officers new inspection powersand strengthens the criminal regime fornational minimum wage offences.These new measures send a clear message thatnon-compliance is not an option. Since the introduction of the nationalminimum wage, HMRC have discoveredunderpayments totalling over £28 million,affecting almost 78,000 of the mostvulnerable workers.

Would a government formed byyour party use the levers that havebeen created by the currentgovernment to encourageemployers to move towards fairerwages for those at the bottom endof the labour market? We arethinking specifically here of theopportunities inherent ininitiatives such as LocalEmployment Partnerships wheregovernment, in providing skillstraining and provision (train togain, business link etc), couldlegitimately begin to askemployers to guarantee fairerwages above the nationalminimum as examples of bestpractice.

JJoonnaatthhaann DDjjaannooggllyy MMPP::We do not agree that the government havehelped the bottom end of the labour marketon a net basis, and emerging unemploymentfigures demonstrate this. We are committed toproviding the British workforce with the skillsneeded to succeed in an international labourmarket, and have announced a number ofpolicies aimed at doing just this – theexpansion of real apprenticeships, forinstance. These skills are not only designed tohelp people get jobs, but to keep them andprogress in them too. It is natural that, asworkers become more experienced and gainadditional qualifications they become ofgreater value to their employer and socommand higher levels of pay. Levers like thisbenefit employer and employee alike and havea valuable contribution to make to tacklingpoverty.

JJoohhnn TThhuurrssoo MMPP::Liberal Democrats would certainly wish totake advantage of all the levers available tohelp build a society where all employeesreceive a fair wage and a reasonable livingstandard.

PPaatt MMaaccFFaaddddeenn MMPP::The objective of Local EmploymentPartnerships is to encourage people back intowork and off benefits, so they can developskills and training they need to progress in theworkplace. Local Employment Partnershipsdo not aim to set higher rates of pay withinthe labour market.

Would your party considerbuilding ‘fair pay’ commitmentsinto government procurementpolicies?

JJoonnaatthhaann DDjjaannooggllyy MMPP::We continue to explore ways of giving smalland medium enterprises a bigger share of the£125 billion annual government procurementbudget. Small and medium firms employ overhalf of Britain’s total private sector workforce,so helping them succeed and expand is animportant part of creating jobs and providingopportunities for career – and pay –advancement within such organisations. AConservative Government would certainlyexpect private sector organisations competingfor state contracts to comply with all relevantlegislation and aspire to meeting or betteringcurrent best practice.

JJoohhnn TThhuurrssoo MMPP::Yes

PPaatt MMaaccFFaaddddeenn MMPP::The Government wants to see people paid adecent wage and is committed to acting as anexemplary employer in all ways that it can. AllGovernment Departments offer a strongpackage of measures to support parentsincluding flexible working, childcare, training,parental leave, mentoring and support.The Government will continue to examine itspractices as an employer to ensure that itsupports staff who are directly and indirectlyemployed.

Does your Party support livingwage initiatives across the countrysuch the London Living Wagewhich is now supported by theConservative Mayor of London,Boris Johnson and other successfulexamples at organizations such asBarclays and KPMG?

JJoonnaatthhaann DDjjaannooggllyy MMPP::Conservatives certainly support measures toraise awareness, particularly among employers,of the true cost of living, which has soared inrecent years. Similarly, firms making use ofcontractors should encourage thosecontractors to meet their own best practice onpay and conditions. However, we don’t thinkthe evidence is clear that region-by-regionminimum wage rates will necessarily do whatthey are supposed to do, that is improvematters for people on lower salaries. Oneconcern is that the additional red tape forsome small businesses could discourage themfrom employing anyone at all.

JJoohhnn TThhuurrssoo MMPP::Yes

PPaatt MMaaccFFaaddddeenn MMPP::When employers are in a position to payhigher wages, the Government very muchwelcomes this.


Would a government formed byyour party follow the examplecurrently set by certaingovernment departments—such asthe department of children,schools and families—inimplementing an in-house livingwage policy for its staff across allgovernment bodies anddepartments?

JJoonnaatthhaann DDjjaannooggllyy MMPP::If elected, an incoming Conservativegovernment would take into account a rangeof factors when looking at departmental paystructures, including the status quo and, ofcourse, the state of the public finances.

JJoohhnn TThhuurrssoo MMPP::Liberal Democrats are certainly attracted tothe concept. We would look to research theimplications and seek to bring in such policyas soon as practicably possible.

PPaatt MMaaccFFaaddddeenn MMPP::Decision on public sector pay are forindividual departments and agencies. Theyneed to ensure pay wards reflect their ownrecruitment and retention, are affordable andare value for money. That doesn’t mean thereis a set target or level for any individualworkforce.

Recent pay wards in some areas, for examplethe health service, Department of Work andPensions, Department for Children Schoolsand Families or the coastguards, havespecifically targeted pay towards those onlowest income.


1 www.conservatives.com, Policy, Universities and Skills.2 We define ‘working poverty’ as the conditionspertaining when an individual lives in a household withsomeone in work but the household income isnevertheless below the poverty line3 Graeme Cooke and Kayte Lawton, Working out ofPoverty: A study of the low-paid and the ‘working poor’(IPPR, 2007)4 Caroline Lloyd, Geoff Mason, and Ken Mayhew, eds.,Low-Wage Work in the United Kingdom (New York:Russell Sage Foundation, 2008), p. 15 5 6 D Metcalf, On the impact of the British nationalminimum wage and employment (London: LSE Centrefor Economic Performance, 2006)

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Not Just For The Good Times

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