Social Care

3.63 According to Laing & Buisson (2004), in April 2004 there were an estimated 486,000 places in residential settings for long stay care of older and physically disabled people in the UK. Capacity has decreased by 9,600 since 2003 and by 64,900 since 1999. Laing & Buisson report that the capacity of the UK care home sector expanded up to the mid-1990s, but has since contracted, largely as a result of reforms in the public funding of community care. Occupancy rates have remained firmly above the 90 per cent level for the last four years as capacity shortages have become more common. As can be seen in Figure 3.21, the total number of jobs in the residential social care sector has been rising slowly since the introduction of the minimum wage, with a shift towards full-time jobs.

Figure 3.21

Employee Jobs in the Residential Social Care Sector, Thousands, 1998-2004

Source: ONS employee jobs series, 1998-2004, GB.

3.64 Laing & Buisson report that the number of home care hours funded by English local authorities has grown in every year but one (1998) since the community care reforms in 1993. They indicate that total contact hours increased by 4 per cent in the year to September 2003, although the number of households receiving home care has been on a downward trend, suggesting a more intensive service is being provided. A survey by the United Kingdom Home Care Association (UKHCA), however, found that total home care provision was little changed since 2000. Its findings suggest there has been a fall in the number of independent domiciliary care workers (97,500 in 2004 compared with 121,500 in 2000) but that each worker is estimated to work on average 25 per cent more hours than in 2000. A significant reduction of workers aged 50 or over was reported, apparently reflecting reluctance on the part of many to undertake further training and acquire additional qualifications.

3.65 The impact of the minimum wage on hourly earnings in the residential social care sector is shown in Figure 3.22. It can be seen that the proportion of employees paid the adult rate did not increase following the October 2003 uprating, remaining at 4 per cent between April 2003 and April 2004 and significantly below the 6 per cent seen in April 2002. This suggests that the impact of the minimum wage in this sector is reducing, with competition from employers in other low-paying sectors (e.g. retailing) now a more important determinant of wage rates.

Figure 3.22

Hourly Earnings Distribution for Employees Aged 18 and Over in the Residential Social Care Sector, 2002-2004

Source: ASHE, April 2002-2004 without supplementary information.

Notes:
1. NMW label shows the adult NMW rate in April of the given year.
2. Gross hourly earnings excluding overtime.

3.66 We have noted in previous reports that regulatory requirements and funding arrangements constrain the ability of the social care sector to respond to the minimum wage. Because minimum staffing ratios are established as a legal requirement, there are clear limits on the scope to reduce staffing levels. As noted earlier, this was borne out by our survey which found that, among firms affected by the October 2003 upratings, those in the social care and childcare sectors were least likely to reduce staff levels. In addition, social care providers are limited in their ability to increase prices due to their reliance on public funding.

3.67 We have recommended in previous reports that the Government should ensure that policies on commissioning care reflect the costs of provision. The Government's evidence reported that, 'between 1996/97 and 2003/04, funding was increased by about 22 per cent in real terms, an average of three per cent per annum. Resources will continue to increase, by an average of about six per cent per annum in real terms, until 2005/06.'

3.68 Evidence from employer organisations, case studies and our own survey, however, continues to highlight problems with public funding failing to meet the additional costs of the minimum wage in social care. The Independent Care Organisations Network (ICON) reported that there were winners and losers - not just between regions but also in terms of the type of care provided.

'Continued NMW increases well above average earnings, combined with substantially lower increases in fees paid by government, will erode our margins and will make it extremely difficult to maintain differentials and impact our ability to recruit and retain staff, maintain employee motivation and reward career development.'

BUPA Care Services evidence

3.69 Laing (2004) reports that since 2002 'many local authorities facing capacity shortages have increased their fees by amounts in excess of ordinary inflation and a handful have increased their fees by substantial amounts. Despite the progress that is being made, there were still substantial gaps between fair fee rates and the weekly fees paid by social services in 2003/04.' Laing found that the majority of local authorities were willing to pay fees close to the rate appropriate for care homes which have not modernised, but in his view no local authority in England was paying fees appropriate for care homes which have invested in the more demanding physical standards set for 'new' homes first registered since April 2002.

3.70 In addition to some local authorities being unwilling to take full account of forthcoming upratings of the minimum wage, ICON also raised concern about funding the cost of travelling time. Workers must be paid the minimum wage for time spent travelling from one work assignment to the next (excluding rest breaks), but figures from the UKHCA indicated that up to two-thirds of workers were not being paid specifically for travel time, although some of these may receive payment by way of premiums for service user contact time. ICON told us that local authority prices are usually based on service user contact time only and the impact of the minimum wage and the Working Time Regulations has not been factored into prices. Furthermore, we were told that local authorities were increasingly inclined towards purchasing very short visits (15 minutes or less) making it even harder for social care providers to absorb the cost of travel time.

3.71 We recognise that the Government has increased funding for local authorities and note that many local authorities are raising fees to give greater recognition of the costs of provision. But the approach has been variable across the country and some problems remain. We therefore recommend that the Government continue to make clear to local authorities that policies on commissioning care should reflect the costs of provision, including payment of travelling time. We also recommend that the Government monitor the approach of local authorities, examine the reasons for any uneven provision and, if appropriate, provide further guidance.

3.72 In addition to the funding problems, consultation also highlighted a few sector specific issues relating to the minimum wage. The first was the application of the minimum wage to 'sleepovers'. 'Sleepovers' cover situations in which a worker is required to sleep on the premises and be available to deal with emergencies, but would not necessarily expect to be woken. In accordance with our previous recommendations, there is no requirement to pay the minimum wage for 'sleepovers', except for the time the worker is awake and expected to be available for work.

3.73 Our fourth report (2003) noted there was an element of uncertainty about the application of the minimum wage to 'sleepovers', resulting from some Employment Appeal Tribunal judgements which held that the minimum wage was payable for the whole period of work in circumstances where the worker was able to sleep at times during the night. We therefore recommended that the Government should examine whether the present uncertainty over the treatment of 'sleepovers' could best be resolved through revised guidance, or whether a change to the Regulations was required.

3.74 In May 2003 the Government published an insert to the Detailed Guide to the National Minimum Wage on the issue of 'sleepovers'. The guidance emphasised the need for the employment contract to set out clearly the period when the worker is permitted to sleep and for the employer to provide suitable sleeping facilities. The guidance notes that 'in cases where the employment contract does not specify any sleeping time, however, tribunals seem likely to conclude that the minimum wage should be paid for the full time when the worker is at work'. Consultation suggests that the additional guidance has helped clarify the treatment of sleepovers but that there needs to be greater awareness of the advice.

3.75 The second technical issue raised during consultation concerns on-call arrangements. At present the minimum wage is payable for hours spent on-call at or near the place of work (except for time entitled to be spent at home). Some on-call workers, however, do not have set hours or an annual salary and are deemed to perform 'unmeasured work', e.g. a home care worker may live with the client for a period of time. In these circumstances there should either be a 'daily average' agreement of hours to be worked or the minimum wage must be paid for every hour worked. The GMB expressed concern that the unmeasured work category is open to abuse, since workers may not have the bargaining power to negotiate agreements which are genuinely fair. The GMB and TUC suggested a need for further guidance on 'unmeasured work'. The Department of Trade and Industry's Detailed Guide to the National Minimum Wage, however, includes a detailed section on the rules although they may not be widely known about. There may therefore be a case for making the guidance more accessible. Awareness of the minimum wage is considered in Chapter 6.

3.76 ICON also highlighted potential non-compliance with the minimum wage resulting from the Department of Health's initiative enabling social care users to obtain a 'direct payment' to be used to buy services for themselves to meet their social care needs. One option is for the recipient to use the money to employ their own staff and ICON is concerned that people may be unaware of their legal obligations. The Department of Health's Guide to Receiving Direct Payments From Your Local Council states, however, that 'if you plan to employ staff, you will need to show that you will meet your legal requirements as an employer' and highlights the need to ensure compliance with the minimum wage. We will keep the issue under review and are grateful to ICON for alerting us to this potential problem.

3.77 Overall the social care sector remains one where the minimum wage has a significant effect, and where a number of technical issues create complexity and need to be kept under review. It is also one where the role of local authorities as purchasers of care is crucial, and where society needs to be willing to provide the additional resources required if workers' wages are to rise. But the impact of the minimum wage on the economics of the sector has not increased over recent years: if anything it seems to have diminished slightly.

Agriculture

3.78 While we have seen stable or growing employment in many of the low-paying sectors since the minimum wage was introduced, the decline in employment in agriculture, which has been evident for many decades, has continued. As shown in Figure 3.23, there were 225,000 employee jobs in the sector in September 2004, a fall of 71,000 compared with September 1999. The position has, however, been more stable over the last two years. According to the Department for Environment, Food and Rural Affairs (Defra, 2005b) there were 192,000 agricultural workers in the UK in June 2004 and the total labour force (including farmers, spouses, partners and directors) numbered 546,000.

Figure 3.23

Employee Jobs in the Agriculture Sector, Thousands, 1998-2004

Source: ONS employee jobs series 1998-2004, GB.

3.79 The agricultural sector is unique in that statutory minimum rates for different categories of worker are set by the respective Agricultural Wages Boards (AWB) for England and Wales, Scotland, and Northern Ireland. These cannot be set below the National Minimum Wage. Adult rates apply from the age of 19 and the Boards also determine some other conditions of employment, such as overtime rates and sick pay. The National Minimum Wage has had a direct influence on the lowest agricultural minimum rates in England, Wales and Scotland, and in recent years they have been set at the same level. Accordingly, the Manual Harvest Worker rate used in England and Wales (which may be paid to those employed to undertake manual harvesting tasks only, for a maximum of 30 weeks per 12 month period) and the casual rate used in Scotland (which may be paid for the first ten weeks of employment only) rose to £4.85 for workers aged 19 and above in October 2004. However in Northern Ireland there is a single rate for all agricultural workers, which rose to £5.09 per hour in April 2004.

'Changes to the NMW have been the key driver of the wage rates set by the A gricultural Wages Board.'

National Farmers' Union evidence

3.80 The hourly earnings distribution (Figure 3.24) shows that a significant proportion of the agricultural workforce is paid at rates well above the National Minimum Wage (and the equivalent AWB rate). This reflects the range of higher statutory minimum rates in place within the agricultural sector, which must be paid to non-seasonal workers and to those with particular qualifications or experience. For example, in England and Wales the minimum rate in April 2004 for those not employed on a seasonal basis was £5.15 per hour (the Standard Worker rate) and the Craft Grade minimum rate was £6.02 per hour.

Figure 3.24

Hourly Earnings Distribution for Employees Aged 18 and Over in the Agriculture Sector, 2002-2004

Source: ASHE, April 2002-2004 without supplementary information.

Notes:
1. NMW label shows the adult NMW rate in April of the given year.
2. Gross hourly earnings excluding overtime.

3.81 According to ASHE 2004a (not shown), only 6 per cent of agricultural workers earned at or below the adult rate of the National Minimum Wage in April 2004. However, it is possible that this April survey does not capture many of the casual or seasonal workers who are employed later in the year to cover the harvest period only. Defra (2005b) records that in June 2004 there were 69,000 seasonal or casual workers in agriculture (36 per cent of all workers) although this figure may again underestimate the total number of non-permanent workers employed over the course of a year.

3.82 The National Farmers' Union (NFU) told us that the significant increases in the lowest agricultural minimum rates, as a direct result of National Minimum Wage upratings, have had a considerable impact on those sectors where the labour requirement (and thus labour costs) is greatest and where the seasonal workforce is concentrated. This includes horticulture (for example fruit and vegetable picking) and general cropping. According to Defra (2005a) 58 per cent (26,000) of the total non-permanent workforce in England in June 2003 were concentrated in these two sectors. Seasonal and casual workers are most likely to be paid at an AWB rate equivalent to the National Minimum Wage and are thus directly affected by minimum wage upratings. Some are likely to be overseas workers, including those who have obtained a permit enabling them to work during the harvest period under the Seasonal Agricultural Workers Scheme. During a Commission visit to Cambridgeshire, we found that local farmers and suppliers were unable to recruit unskilled labour from the local area due to competition from other industries. As a result, a substantial proportion of the casual workforce originated from Eastern Europe, particularly Poland and Lithuania.

3.83 The agricultural sector, and in particular horticulture, also faces significant international competition, as well as pressure from major food retailers and caterers to reduce output prices. Our Cambridgeshire visit demonstrated that some farmers and suppliers had responded to this pressure by creating efficiencies through specialisation and large-scale production of fruit and vegetables. They had also invested in technology to improve the quality of produce and consistency of supply. The CBI's submission also commented that increased competition in horticulture had driven business to other parts of Europe with lower wage costs.

3.84 The NFU reported that the National Minimum Wage had driven increases in all of the AWB minimum rates in place in England and Wales, because of the focus on differentials during the Board's negotiations. Although there has been some compression at the lower end, the percentage differences between the Standard Worker and Craft and Appointment Grades, which have historically been in place, have been maintained. During our visit to Cambridgeshire, one of the farmers we spoke to identified as a serious deficiency the absence of a provision in the Agricultural Minimum Wage legislation to enable employers to reach fair piece rate agreements with their workers. It was suggested that farmers would welcome a change to the Agricultural Wages Act 1948 to mirror the new provisions on fair piece rates introduced under the National Minimum Wage legislation.

3.85 It is difficult to assess the impact of the National Minimum Wage within the agricultural sector. Employment has been falling since long before the introduction of the National Minimum Wage and we received conflicting evidence about whether the minimum wage had any contributory role in accelerating this decline. The vast majority of workers in the sector earn significantly more than the National Minimum Wage, indicating that its direct impact is small. But this direct impact is likely to fall disproportionately on certain sectors such as horticulture. The minimum wage also has a strong influence on the higher statutory minimum rates set by the Agricultural Wages Boards.

Textiles, Clothing and Footwear

3.86 The textiles, clothing and footwear industries continue to contract as a result of increasing competition from low-wage economies and the transfer of high volume manufacturing capacity offshore, a process that started well before the introduction of the minimum wage.

3.87 Low cost imports have resulted in continuing price deflation on the high street, with UK companies unable to remain competitive in traditional volume areas of the market. Many UK companies are now focusing on high value, niche markets. This decline in output is reflected in the sharp reduction in the number of employee jobs in the textiles, clothing and footwear sectors. As shown in Figure 3.25, the number of jobs stood at 140,000 in September 2004, down by over a half since the introduction of the minimum wage. Nearly 200,000 jobs have been lost in these three industries since March 1998. Even in the last two years the number of jobs has fallen by nearly a quarter. The reduction in the number of full-time employee jobs mirrors the general fall in jobs, while the number of part-time jobs also declined rapidly from March 1998 to March 2002, but has since remained steady.

'Some companies have sought to address the decline through new technology and changes in their customer base, but these measures take a number of years to come to fruition.'

British Apparel & Textile Confederation

Figure 3.25

Employee Jobs in the Textiles, Clothing and Footwear Sector, Thousands, 1998-2004

Source: ONS employee jobs series, 1998-2004, GB.

3.88 The National Minimum Wage continues to have an important role in setting wage rates in the textiles, clothing and footwear sector. This is clearly evident in Figure 3.26, with the main spikes reflecting the adult minimum wage rates. According to ASHE 2004a (not shown), 5 per cent of the workforce in these sectors earned the adult rate of the minimum wage in April 2004. A further 7 per cent earned between the minimum wage and £4.85.

Figure 3.26

Hourly Earnings Distribution for Employees Aged 18 and Over in the Textiles, Clothing and Footwear Sector, 2002-2004

Source: ASHE, April 2002-2004 without supplementary information.

Notes:
1. NMW label shows the adult NMW rate in April of the given year.
2. Gross hourly earnings excluding overtime.

3.89 The extent to which the minimum wage is accelerating the decline in the sector, if at all, is not known. The British Apparel & Textiles Confederation accepts that the main reason for decline lies elsewhere but considers that the minimum wage is a contributory factor. This view is supported by the CBI, which reports that the textiles industry has been significantly affected by the minimum wage, with companies finding it increasingly difficult to maintain margins due to increased cost pressures in the UK, combined with competition from abroad. However, this view is not shared by Community, the GMB or the TUC, all of whom regard globalisation as overwhelmingly responsible for the loss of jobs in the sector.

3.90 Written and oral evidence from employer and worker organisations describes companies making a variety of adjustments to address the decline in the sector and the impact of the minimum wage. These include the introduction of new technologies and changes in customer base that have led to improved productivity and efficiencies. Our own employers' survey found that textiles and clothing companies were the least likely to regard themselves as experiencing any benefit from the minimum wage.

3.91 Traditionally these sectors make particular use of incentive pay systems. In oral evidence, employers' representatives reported that recent increases in the minimum wage have had a negative impact on incentive pay systems, with a higher proportion of piece rate workers now being affected than when the minimum wage was first introduced. They argued this had reduced the incentive to be productive, with more capable workers unable to earn much more than those who are less efficient. However, workers' representatives and others took a different view and reported that many employers had successfully addressed this problem through multi-skilling frameworks which had reduced the number of low-skilled jobs.

3.92 Our overall assessment of the textiles, clothing and footwear sectors is that while the minimum wage clearly has an impact on some wage rates within these sectors, and may have played a subsidiary role in speeding employment decline, the dominant factor has been external competition. Competition from low-wage economies is likely to continue to reduce employment levels in this sector until a floor is reached, leaving a UK industry that is concentrated on high value, niche products, rather than on an ability to compete on labour costs.