1.

This appendix describes the results of two surveys undertaken by the Low Pay Commission. The first is a survey of low-paying sectors, which builds on surveys conducted previously. The second is a small-scale survey of employers who have participated in the New Deal. Both survey questionnaires are given at the end of this appendix.

Survey of Low-paying Sectors

2.

In our second report we included evidence from two surveys of low-paying sectors which we conducted. The first survey, undertaken in December 1998, established a baseline for assessing how firms adapted to the National Minimum Wage. We followed this up in 1999 with a survey to examine action taken by firms which had indicated in the first survey that the minimum wage would affect them.

3.

For this report we conducted a third survey of employers. The major findings on such issues as the impact of the minimum wage on paybills and differentials, and the effects on businesses and employees were outlined at Appendix 2 in Volume 1 of our report. This appendix covers findings about pay structures and the Development Rates.

4.

We decided to target our third survey on sectors that were most likely to be affected by the introduction of the minimum wage. Because the sectoral composition of the sample is very different, the overall results cannot be directly compared with the previous surveys. But the third survey gives a much broader coverage than the previous two.

5.

With the help of the trade associations shown in Table A5.1, we distributed postal questionnaires to over 20,400 employers, mainly small and medium-sized firms. The questionnaires were distributed between September and November 2000. We received 2,915 replies — a response rate of 14 per cent — which is reasonable for a postal survey. Table A5.2 shows the response by sectors. We are grateful once again for the assistance we received from the trade organisations which helped us distribute the questionnaires and encouraged their members to complete them. We are also grateful to those businesses which took the time to complete and return the questionnaires.

Table A5.1
Sectors and Organisations Participating in the Low Pay Commission Survey
Sector	Trade Association/Organisation
Business services	Business Services Association Cleaning and Support Services Association
Childcare	National Day Nurseries Association Kids' Clubs Network Pre-school Learning Alliance
Hairdressing	National Hairdressers' Federation Hairdressing Employers Association
Hospitality	British Hospitality Association Brewers and Licensed Retailers Association The Restaurant Association
Retail	Association of Convenience Stores
Social care	National Care Homes Association Independent Healthcare Association United Kingdom Home Care Association Association for Residential Care British Federation of Care Home Proprietors
Textiles	Nottinghamshire and Derbyshire Clothing and Textiles Association British Apparel and Textile Confederation British Footwear Association Lee Valley Clothing Industry Business and Design Centre
Other	Black Business Association North London Chamber of Commerce

The response rate in the retail sector was lower than expected. We have not presented separate results for the retail sector or the 'other' category, which also had a very low response rate. Nor have we done this for the business services sector, because the total sample size was relatively small. But the data for these sectors are included in the overall results.

The respondents to the survey are not a random sample of businesses in the sectors. The sample did not cover those, mainly very small businesses, which are not members of trade organisations. The respondents themselves are likely to be biased towards those most affected by the minimum wage. Thus the results are not representative of the sectors as a whole and have not been weighted.

Table A5.3 shows that the respondent businesses covered almost half a million employees, the vast majority of whom came from the hospitality sector.

Pay Structures

9.

10.

Some 10 per cent of all firms responding to the survey had age-related pay structures with adult rates starting at 18 or younger. Seventeen per cent of firms had age-related pay structures with adult rates starting at 21 or younger. Despite the influence of the age threshold for the main National Minimum Wage only 4 per cent of firms had age-related pay structures with adult rates starting at age 22. Firms which use the youth Development Rate and have age-related pay structures are more likely to pay their adult rate at age 21 or 22 than those with age-related pay structures which do not use the youth Development Rate.

Firms with age-related pay structures were asked about their minimum hourly rates. Figure A5.1 gives the distribution of minimum pay rates for those firms in the sample with age-related pay structures, and shows that average minimum hourly rates increase steadily with age. By age 20 more firms have minimum rates of at least £3.70 than £3.20, but by age 21 the percentage of firms with minimum rates of £3.70 has increased markedly, with 25 per cent having a minimum rate of £3.70 and 11 per cent having a minimum rate of £3.20. Minimum pay rates for under 18 year olds were below £3.20 per hour in 40 per cent of firms with age-related pay structures.

Figure A5.1

Distribution of Minimum Hourly Pay Rates by Age

12.

13.

Development Rates

14.

 

Table A5.5
Percentage of Firms Using the Youth Development Rate
Hairdressing	Hospitality	Social care	Childcare	Textiles	Total
45	20	12	15	14	18
Note: Base, all firms.

Figure A5.3

Percentage of Users of the Youth Development Rate Who Have Seen Benefits to Their Business

These results were reinforced by the response to a more general question we asked firms: whether the introduction of the National Minimum Wage made them more likely to employ workers exempt from the minimum wage or who could be paid the Development Rate. Table A5.6 shows that firms in hairdressing stand out markedly as being more likely to do both.

Five per cent of respondents said they used the older workers’ Development Rate (see Table A5.7) with 20 per cent of firms in the hairdressing sector using it. Forty per cent of respondents using this Development Rate said it had enabled them to improve the training they provided.

17.

Twenty-two per cent of firms in the sample use age-related pay structures. Forty-six per cent of these firms pay their adult rate from age 18 or younger. Ninety per cent of all respondents are paying their adult rate by age 18. Despite the influence of the National Minimum Wage only 5 per cent of all respondents apply age-related pay scales beyond age 21. These firms are mainly in the hairdressing sector.

18.

The youth Development Rate was used by almost a fifth of employers, many of whom saw benefits from it. The older workers’ Development Rate was less widely used.

19.

We conducted a small-scale postal survey of employers who had participated in the New Deal to look at the impact that the National Minimum Wage has had on them. The Employment Service helped us send questionnaires to almost 1,500 employers during October 2000 who were asked to reply by mid-November. Three hundred and fifty questionnaires were mailed to national organisations participating in the New Deal, and the rest were sent to small and medium-sized firms contacted via Employment Service Local Offices. Table A5.8 shows the response by offices participating in the survey.

20.

21.

22.

Impact of the National Minimum Wage

23.

24.

More than 80 per cent of respondents said that the introduction of the National Minimum Wage had had no effect on their willingness to take on or retain New Deal employees (see Table A5.9). The vast majority of respondents pay New Deal workers the same as other employees doing equivalent work. But there was a high proportion of subsidised placements in our sample.

Table A5.9
Impact of National Minimum Wage on Willingness of Firms to Take on or Retain New Deal Employees
(%)
Take on subsidised employees	More willing Less willing No change	12 6 82
Take on unsubsidised employees	More willing Less willing No change	2 14 84
Retain subsidised employees	More willing Less willing No change	9 5 86
Retain unsubsidised employees	More willing Less willing No change	2 8 90
Note: Base, all firms.

25.

Continuing Involvement in New Deal

26.

 

Table A5.10
Importance of Factors on Decisions to Continue Involvement in the New Deal
	Significant attraction (%)	Slight attraction (%)	Slight deterrent (%)	Significant deterrent (%)	No impact (%)
Availability of subsidy	53	24	0	0	23
Wage costs	18	17	8	4	53
Supervisory effort required	4	6	32	6	52
Duration of training needed by participants	5	6	30	5	55
Work readiness of participants	16	17	23	13	32
Difficulty in recruiting from other sources	9	21	8	2	60
Wider social considerations	13	17	5	4	62
Amount of paperwork involved	2	3	29	13	53
Note: Base, all firms.

Conclusion

27.

28.

The Development Rates were not found to be a significant factor affecting the willingness of employers to take on New Deal workers. The availability of a subsidy was a significant attraction to a number of employers. With the results of this survey, and other evidence in Chapter 2 of this volume, we concluded that the introduction of the National Minimum Wage has not had an adverse effect on the New Deal.