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.