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Appendix 2: Impact on Groups and Sectors >>Back to main report index 1. In Volume 1 of this report we gave our assessment of the impact of the National Minimum Wage. We described the impact on the economy as a whole and on different groups of employees and business sectors. In this appendix we set out in more detail our analysis of these groups and sectors and how they have been affected by the minimum wage. We begin by considering three broad groups of employees: women, disabled people and ethnic minorities. We then consider seven business sectors where low pay is common: retail, hospitality, business services, social care, childcare, textiles and clothing, and hairdressing. 2. The earnings data presented for women are based on the Office for National Statistics (ONS) central estimate methodology. The earnings data presented for ethnic minority and disabled employees are based only on the Labour Force Survey (LFS), and are an upper bound since this survey overstates the number of low-paid employees. The earnings data for low-paying sectors are based only on the New Earnings Survey (NES), and are a lower bound since this survey understates the number of low-paid employees. These estimates are therefore not directly comparable with the ONS central estimate methodology. The median and lowest decile hourly earnings reported for the low-paying sectors are based on grossed NES data. Women Beneficiaries 3. Differences in employment patterns mean that women are more likely to benefit from the National Minimum Wage than men. As we reported in Volume 1, around 70 per cent of beneficiaries are women, the majority of whom are working part time. Earnings 4. The impact of the minimum wage on full-time earnings for men and women can be seen from Figures A2.1 and A2.2. Figure A2.1 shows the high concentration of women among low-paid full-time employees. In 1998 there was a higher proportion of female than male earners in each earnings band up to around £6.00 per hour. The impact of the minimum wage has consequently been greater for women. As can be seen from Figure A2.2, after the minimum wage was introduced, spikes developed at around £3.60, £4.00 and £5.00 per hour, which were more pronounced for women than for men. Figure A2.1 Hourly Earnings Distribution for Full-time Employees Aged 18 or Over, 1998 
Source: LPC Calculations, Grossed NES and LFS data Figure A2.2 Hourly Earnings Distribution for Full-time Employees Aged 18 or Over, 2000 
Source: LPC Calculations, Grossed NES and LFS data 5. The distribution of part-time employees’ earnings changed after the minimum wage was introduced. Figure A2.3 shows that in 1998 the distribution was relatively smooth with small spikes at around £3.50, £4.00 and £5.00 per hour. As Figure A2.4 shows these became more marked at around £3.60, £4.00 and £5.00 per hour after the minimum wage was introduced. There is little difference between the earnings of male and female part-time employees before and after the introduction of the minimum wage. This is because, compared with women, a much higher proportion of male part-time employees are younger and they have lower earnings. In Spring 2000 about a quarter of all male part-time employees were aged 18—21 compared with less than a tenth of female part-time employees. 6. The impact of the National Minimum Wage has been greater for part-time than for full-time employees. This is true for both men and women and is due to the much higher proportion of part-time employees who are low-paid. In Spring 1998 19 per cent of male part-timers and 15 per cent of female part-timers earned less than £3.50 per hour. This compares with 3 per cent and 4 per cent of their full-time counterparts. The minimum wage has narrowed the gender pay gap, particularly that between female part-time employees and male full-time employees. Indeed, the Equal Pay Task Force report Just Pay (February 2001) pointed out that ‘although the National Minimum Wage has been in effect for only a relatively short period of time, there is already evidence of its potential to reduce the gender pay gap at lower wage levels and in relation to part-time workers’. Figure A2.3 Hourly Earnings Distribution for Part-time Employees Aged 18 or Over, 1998 
Source: LPC Calculations, Grossed NES and LFS data Note: Sample sizes are smaller for male part-time employees than for other groups. Figure A2.4 Hourly Earnings Distribution for Part-time Employees Aged 18 or Over, 2000 
Source: LPC Calculations, Grossed NES and LFS data Note: Sample sizes are smaller for male part-time employees than for other groups. Employment and Non-employment 7. In the year since the minimum wage was introduced, the labour market performance of women has continued to improve. The female employment rate rose by 0.6 percentage points, only marginally less than that of men, and the female ILO unemployment rate fell by 0.3 percentage points. 8. The employment patterns of men and women are different. As mentioned earlier, a much larger proportion of women than men work part time: around 43 per cent compared with just 7 per cent. Women are also more concentrated in the low-paying sectors. They account for around 60 per cent of employees in the low-paying sectors described later in this appendix, but they comprise around 50 per cent of all employees. 9. Women’s levels and rates of economic activity show a continuing upward trend post-minimum wage. In the year after the minimum wage was introduced, the inactivity rate for working-age women fell by 0.4 percentage points, about twice as much as for men. Reductions were particularly marked among younger women (aged under 24), those looking after the family or home, and inactive students. Some of these effects are part of longer-term trends, but the minimum wage almost certainly contributed to this positive labour supply response. Disabled People Beneficiaries 10. In Volume 1 of this report we noted that disabled employees — those with a work-limiting disability — are generally more likely to be lower-paid than non-disabled employees. LFS data suggest that around 136,000 disabled employees stood to benefit from the introduction of the minimum wage. As this number is based solely on LFS data it is an upper bound estimate. Earnings 11. Figure A2.5 shows that pre-minimum wage there was a higher proportion of disabled than non-disabled employees towards the bottom of the earnings distribution, particularly up to around £5.00 per hour. Proportionately more disabled people therefore stood to benefit from the minimum wage. As Figure A2.6 shows, post-minimum wage there has been a clear shift to the right of the earnings distributions. There is a significant spike at £3.60 per hour, with a higher proportion of disabled than non-disabled employees paid at the minimum wage. Further spikes are also clear at around £4.00 and £5.00 per hour. This is consistent with findings from Incomes Data Services Ltd. (IDS, 2000a) that the minimum wage, together with a tight labour market, is creating a ‘mezzanine’ level effect which is forcing firms to pay more than the minimum to stay ahead of the competition. Figure A2.5 Hourly Earnings Distribution for Disabled and Non-disabled Employees Aged 18 or Over, 1998  Source: LFS data, Spring 1998 Figure A2.6 Hourly Earnings Distribution for Disabled and Non-disabled Employees Aged 18 or Over, 2000  Source: LFS data, Spring 2000 12. We commissioned research (Schneider, 2001) among Employment Service Disability Employment Advisors (DEAs) and employers of disabled people to examine the effects of the National Minimum Wage on disabled people. It reported that, among around 50 DEAs and 50 employers who responded, there was strong overall agreement (75 per cent) that the minimum wage has benefited disabled people by making low-paid jobs better paid. Employment and Non-employment 13. Employment among disabled people in Great Britain increased from 2.6 million to 3.1 million between 1998 and 2000. In Volume 1 of this report, we noted that between Spring 1999 and Spring 2000 the employment rate among working-age people with a work-limiting disability increased by 0.5 percentage points, a slightly smaller rise than that in the aggregate employment rate. The unemployment rate of disabled people is much higher than that of non-disabled people — 10.2 per cent compared with 4.9 per cent at Spring 2000 — but unemployment rates for both groups have continued to fall post-minimum wage. These aggregate figures suggest the minimum wage has not had an adverse effect overall on the employment of disabled people. 14. The research by Schneider (2001) revealed a generally positive picture of the employment of disabled people. Most of the employers surveyed said that the minimum wage had not affected the recruitment, training or promotion of disabled employees. And two-thirds of the employers and DEAs who responded thought that the National Minimum Wage had not reduced the number of paid work opportunities open to disabled people. A MENCAP Employment Officer reported that ‘employers now expect to pay NMW and in cases where output matches that of non-disabled employees [the NMW] has not, in my experience, been a barrier to employment’. 15. Research and evidence give a mixed picture of the impact of the National Minimum Wage on supported employment. Hudson (2001) found that all seven employment projects working with disabled people which she surveyed reported that the minimum wage had had no direct impact on supported employment opportunities. But some of the DEAs surveyed by Schneider (2001) suggested that the introduction of the minimum wage meant that more employers had sought help through supported placements to maintain the jobs of disabled people in their employment. One employer commented that in supported placements some employers had fought against having to increase pay to reflect a rise in the minimum wage and looked for ways to avoid doing so. 16. Difficulties in supported employment placements are also a theme in the evidence we received from the Shaw Trust, a charity that provides routes to work for disabled people and others with a disadvantage in the workplace. It reported that ‘the government’s failure to respond to the LPC’s recommendation ... regarding the NMW and the Supported Employment Programme has reduced the number of job opportunities made available to disabled people through the Voluntary Sector’s element of this programme. In Shaw Trust’s case the introduction of the NMW created an additional cost of £210,000. The impact of this was that the Trust has been unable to support a minimum of 50 additional places on the SE Programme which it had done in previous years.’ 17. Research on the impact of the minimum wage on disabled people undertaking therapeutic activity, predominantly people with learning difficulties and mental health needs, shows that the effects are mixed. Hudson (2001) found many of the projects surveyed agree and clarify with employers the nature of work experience, therapeutic placements and mutual obligations. Such good practice helped avoid confusion about whether the minimum wage should apply. The minimum wage was part of the impetus for several day centre based projects to draw a firmer demarcation between training, placements and jobs as they tried to clarify whether people were undertaking work or activity. While the distinction between work and activity continues to be seen as a grey area, the research suggested that the minimum wage is one of several factors encouraging projects working with disabled people to ‘progress’ them into employment in a mainstream environment. But the research also indicated that disabled people are concerned about financial security and anxious not to lose their social security benefits prematurely as they take steps towards mainstream employment, and reported examples where they had sought to reduce their hours or pay levels to preserve their entitlement to benefits. Ethnic Minority Groups Beneficiaries 18. In Volume 1 of this report we indicated that ethnic minority employees are over-represented in the group paid below minimum wage rates in 1998. LFS data suggest that around 60,000 ethnic minority employees stood to benefit from the introduction of the minimum wage. As this number is based solely on LFS data, it is an upper bound estimate. The sample numbers are small, but Pakistani/Bangladeshi employees in particular appear to be over-represented among low earners. Earnings 19. Figures A2.7 and A2.8 show the earnings distributions for White and ethnic minority employees before and after the introduction of the minimum wage. Pre-minimum wage there were proportionately more ethnic minority employees at the lower end of the distribution, particularly around the £3.00 to £5.00 per hour range of earnings. As Figure A2.8 shows, the shape of the distribution changes significantly post-minimum wage. There is an emergence of clear spikes at around £3.60, £4.00 and £5.00 per hour for both groups of employees, although these are slightly more pronounced for ethnic minority employees. These spikes are likely to result from a combination of the effects of the minimum wage and the tight labour market. Figure A2.7 Hourly Earnings Distribution for White and Ethnic Minority Employees Aged 18 or Over, 1998 
Source: LFS data, Spring 1998 Figure A2.8 Hourly Earnings Distribution for White and Ethnic Minority Employees Aged 18 or Over, 2000 
Source: LFS data, Spring 2000 20. The minimum wage has helped to close the earnings gap between White and ethnic minority groups. In 1998 lowest decile earnings for all ethnic minority employees were £3.70 per hour compared with £3.77 per hour for White employees. By April 2000 these were equal at £4.00 per hour. Differences within ethnic minority groups remain, with Pakistani/Bangladeshi employees generally being the lowest-paid. Employment and Non-employment 21. At Spring 2000 there were 2.4 million people of working age from ethnic minority groups, comprising nearly 7 per cent of the working-age population. Figure A2.9 shows the composition of working-age ethnic minority groups. Nearly half of all ethnic minority groups are people of South Asian origin, of whom Indians are the largest group. Nearly 30 per cent are Black and 18 per cent are of Mixed/other origin. Figure A2.9 Composition of Ethnic Minority Groups 
22. Employment rates among working-age ethnic minority groups are considerably lower than for Whites. At Spring 2000 employment rates for White men and women stood at 76 per cent compared with 65 per cent for Indians, 62 per cent for Black people and 44 per cent for Pakistanis and Bangladeshis. While employment rates are lower for both men and women in ethnic minority groups than for Whites, the biggest differences are among women, which partly reflects cultural differences between these groups. 23. In the year after the minimum wage was introduced, ethnic minority groups shared in the overall rise in employment. As Figure A2.10 shows, growth in employment rates has been stronger among all ethnic minority groups as a whole than among White workers, increasing by 1.3 percentage points compared with 0.7 percentage points for Whites. Employment growth among Pakistani and Bangladeshi workers has been particularly marked, increasing by 4.1 percentage points between Spring 1999 and Spring 2000. Figure A2.10 Change in Working-age Employment Rate of Ethnic Groups, Spring 1999—Spring 2000 
Source: LFS data, Spring 1999, 2000 24. Unemployment rates among ethnic minority groups have historically been higher than those for White people. At Spring 1999, the ILO unemployment rate of all ethnic minority groups was, at 13.1 per cent, more than twice that of White people. Black and Pakistani/Bangladeshi people had the highest rates of unemployment. In the year following the introduction of the minimum wage, the fall in the unemployment rate was greater for ethnic minority groups as a whole than for White people: 0.7 percentage points compared with 0.5 percentage points. This led to a narrowing of the unemployment gap between White people and ethnic minority groups post-minimum wage. But the unemployment rate rose among some groups, notably Black and Pakistani/Bangladeshi men. 25. The strong employment growth among ethnic minority groups in the year after the minimum wage was introduced is mirrored by an increase in labour market participation. Ethnic minority groups as a whole increased their participation rate by 1 percentage point compared with 0.3 percentage points for White workers between Spring 1999 and Spring 2000. Increases were particularly strong among Pakistani/Bangladeshi workers, whose labour market participation rose by more than 4 percentage points over the year. These figures suggest that the minimum wage may be having a positive impact on the labour supply of these groups. Employment in Low-paying Sectors 26. From April 2001, the ONS replaced the Annual Employment Survey (AES) with the Annual Business Inquiry (ABI) as the source of estimates of employee jobs. Overall the ABI is measuring a higher number of employee jobs than were estimated previously. Two differences between the surveys have accounted for the difference in the estimates produced: the first is under-recording by some contributors to the AES of the number of employees; the second is the change to the estimation procedure used to produce the number of employee jobs. ONS believes the combination of these differences results in the AES underestimating the number of jobs in the economy by around 900,000. It also believes that the ABI produces a more accurate number of employee jobs in the UK. Estimates are closer to those produced by the LFS. The new ABI figures are for 1998 and 1999, and the back series of employee jobs, based on the AES, is also revised. The revisions to the annual and quarterly employee jobs data sets for periods prior to 1998 have been achieved through the use of scaling factors at the two-digit Standard Industrial Classification (SIC) level. The new series are illustrated in Figure A2.11. Figure A2.11 Employment Change in Low-paying Sectors, 1998—2000, New Series 
Source: Employee jobs series, ONS, 1998—2000 (new series) 27. In Volume 1 of our report, we noted that aggregate employment had not been adversely affected by the introduction of the minimum wage. At the sectoral level the picture is more complicated and determined largely by other factors relevant to each sector. As Figure A2.11 shows, the number of employee jobs in the security sector has increased relatively quickly, while in the hospitality and retail sectors the number of employee jobs has increased in line with the national average. The number of employee jobs in textiles and cleaning has declined in line with longer-term trends and structural changes in these sectors. 28. The ABI-related revisions to the quarterly series prior to December 1998 have created some discontinuities in the more detailed data sets which can affect the interpretation of data straddling the September—December 1998 period. We are concerned that the revisions process may have had an adverse impact on the quality of the historic data for some of the low-paying sectors. We are pursuing this with ONS and will continue to look at the quality of the new series as more data are released. We have expressed our concern about ONS data in our first two reports and in Volume 1 of this report. We find it worrying that these concerns remain. Good quality statistics are essential if we are to fulfil the remit Government sets us in monitoring and evaluating the impact of the minimum wage and in formulating our recommendations. Retail The National Minimum Wage has been generally manageable. Small stores are more likely to have been affected than larger stores. Median earnings in the sector were £4.94 per hour and lowest decile earnings were £3.84 per hour in 2000. Employment has continued to rise since the introduction of the National Minimum Wage. Earnings 29. The impact of the minimum wage on earnings in the retail sector is shown in Figures A2.12 and A2.13. Small firms are much more likely to have been affected by the introduction of the National Minimum Wage than large firms. Following the introduction of the National Minimum Wage the percentage of employees paid below minimum wage rates, in firms employing up to 9 employees, fell from 18 per cent in 1998 to 5 per cent in 2000. In contrast, in firms employing 100 or more employees, 6 per cent of employees were paid less than minimum wage rates in 1998 and 3 per cent in 2000. In April 2000 a significant number of employees in the sector were employed at £3.60 per hour, mainly in smaller firms. In the larger firms there is a more pronounced spike in the distribution at around £4.10 per hour, reflecting an upward movement in wages at the lower end of the distribution. Figure A2.12 Hourly Earnings Distribution for Employees Aged 18 or Over in Small Firms in the Retail Sector, April 1998—April 2000 
Source: Grossed NES data, April 1998—2000 Note: Businesses with 1—9 employees. Figure A2.13 Hourly Earnings Distribution for Employees Aged 18 or Over in Large Firms in the Retail Sector, April 1998—April 2000 
Source: Grossed NES data, April 1998—2000 Note: Businesses with 100 or more employees. 30. Increases in earnings at the bottom of the distribution for the retail sector are reflected in the increase in lowest decile earnings from £3.75 to £3.84 per hour between 1999 and 2000. The proportion earning less than £4.00 per hour fell from 15 per cent to 14 per cent over the two years. Median earnings fell slightly over the two years. 31. IDS found that nearly all the larger retail companies paid above £4.00 per hour, and report that most of these retailers pay full adult rates from age 18 (IDS, 2000b). The same research indicates that ‘in many areas of the country market forces have pushed up pay rates far beyond what companies are legally obliged to pay their staff’ (IDS, 2000b). One quarter of retailers surveyed by the British Retail Consortium paid higher increases to their staff, even those already paid above the National Minimum Wage. Employment 32. Employment in retail has been on an upward trend since 1993. It grew to around 2.7 million by December 2000, around 11 per cent of all employee jobs. Two-thirds of employees in the sector are women, and a majority of employees work part time. This pattern has not changed since the introduction of the minimum wage, with the proportion of female employees and the proportion of part-time employees remaining relatively stable over the last few years. Around a fifth of employees are young people. 33. But evidence from the Association of Convenience Stores, which represents smaller stores, indicated that the National Minimum Wage had led to its members cutting back on the number of staff and hours in some areas. It also stated that the impact of the National Minimum Wage needed to be seen in the context of other employment legislation. Hospitality Firms have generally been able to cope, although the impact of the National Minimum Wage has been greater in some areas than others. Median earnings in the sector were £4.30 per hour and lowest decile earnings were £3.60 per hour in 2000. Employment has continued to rise since the introduction of the National Minimum Wage. Earnings 34. Figure A2.14 presents the change in the earnings distribution in the hospitality sector. There is a substantial spike in the earnings distribution at £3.60 per hour at April 1999 and again at April 2000, suggesting that in this sector earnings of the lowest paid have not moved substantially between the two years. There is a further spike at £4.00 per hour. Lowest decile and median earnings in the sector between 1999 and 2000 have remained at around the same level. 35. IDS (2001d) reported that with few exceptions companies in the hospitality sector are paying adult rates from age 18. In the fast-food sector the majority of firms are paying adult rates from age 16. Figure A2.14 Hourly Earnings Distribution for Employees Aged 18 or Over in the Hospitality Sector, April 1998—April 2000 
Source: Grossed NES data, April 1998—2000 36. The British Hospitality Association stressed the regional variation in wages. It pointed out in its evidence that the National Minimum Wage needs to be set ‘at a level which takes full account of the different labour market situation which applies in parts of different regions’. The Hospitality Training Foundation report Labour Market Review 2000 suggests that the introduction of the National Minimum Wage spurred faster increases in basic weekly rates for both male and female full-time employees in this sector than in some other industries. In contrast, research which we commissioned (Adam-Smith et al., 2001) indicates that the introduction of the National Minimum Wage had little impact in the hospitality industry in the specific area looked at because labour market shortages placed strong upward pressure on pay levels. 37. IDS conducted research in hotels and found that, in most cases after the introduction of the National Minimum Wage, there was not a knock-on effect on differentials. The hotels reported that ‘where progression is performance-related staff tend not to think in terms of rigid points on pay structures and the fixed differentials between them’ (IDS, 2001a). Employment 38. Employment in the hospitality sector continued on an upward trend from Spring 1998 to December 2000. There are about 1.6 million employees in the sector. Around 60 per cent of employees are women, and the majority of employees work part time. These proportions have remained relatively unchanged over the past two years. Hospitality is a major employer of young people with a heavy reliance on student labour. Around a fifth of employees are aged under 20. Business Services (Cleaning and Security)
39. The impact of the minimum wage on earnings in the two sectors is shown in Figures A2.15 and A2.16. In both sectors there was a shift in earnings at the bottom of the distribution up to 1999. In the cleaning sector this resulted in a spike in the earnings distribution at £3.60 per hour. Eleven per cent of employees were paid around £3.60 per hour in April 2000, a reduction on the proportion in 1999. The 2000 data show two distinct spikes at around £3.60 and £4.00 per hour. In the security sector 5 per cent of employees were earning around £3.60 per hour in April 2000. Figure A2.15 Hourly Earnings Distribution for Employees Aged 18 or Over in the Cleaning Sector, April 1998—April 2000  Source: Grossed NES data, April 1998—2000 Figure A2.16 Hourly Earnings Distribution for Employees Aged 18 or Over in the Security Sector, April 1998—April 2000  Source: Grossed NES data, April 1998—2000 40. Prior to the introduction of the National Minimum Wage, earnings levels in the cleaning sector were very low. Increases at the bottom of the earnings distribution in the sector are reflected in the increase in lowest decile earnings between 1998 and 2000, from £2.73 to £3.60 per hour. Earnings in the security sector were also low prior to April 1999. Lowest decile earnings between 1998 and 2000 increased from £3.04 to £3.82 per hour. 41. The Business Services Association suggested in its evidence to us that ‘because of the current high employment rate and skills shortages across the sector employers are paying over the NMW rate in most areas of the country’. It also reported that the introduction of the National Minimum Wage has tended to result in flattened pay structures. The Cleaning and Support Services Association (CSSA) reported initial compression of pay differentials, and that clients were not always willing to pay for these to be restored. Employment 42. In December 2000 cleaning had around 420,000 employees, security around 140,000. The number of people employed in cleaning has been declining since 1999, whereas the number employed in security has steadily increased and this has continued post-minimum wage. 43. The decline in employment in the cleaning sector could be linked to consolidation in the industry: that is larger firms forcing smaller firms out of the sector, and taking advantage of economies of scale. There would also be a decrease in employment in the sector if firms employed cleaners directly rather than contracting out the service to a specialist cleaning company. But the CSSA reported in its evidence to us that ‘only a very few companies indicated losses in employment numbers due to redundancies because of contract changes brought about by the NMW’. Around 13 per cent of cleaning employees are from an ethnic minority. Young people aged 18 to 21 make up less than 1 per cent of employees. 44. In the security sector around 80 per cent of employees work full time and around 80 per cent are male. This has changed little since the introduction of the minimum wage. Young people aged 18 to 21 account for less than 1 per cent of the workforce. Social Care
45. The impact of the minimum wage on earnings in the social care sector is illustrated in Figure A2.17. Six per cent of employees were earning around £3.60 per hour in April 2000. Increases at the bottom of the earnings distribution in the sector are reflected in the increase in lowest decile earnings between 1998 and 2000, from £3.20 to £3.70 per hour. Employer organisations reported that higher-paid staff had pressed for differentials to be restored. In our own employer survey, three-quarters of the social care respondents affected by the minimum wage had increased pay rates for higher-grade staff. 46. The United Kingdom Home Care Association told us that before the National Minimum Wage the sector had paid more for unskilled staff than the very lowest-paying employers, and the minimum wage had removed this comparative advantage. Hence the National Minimum Wage may have made recruitment to this sector more difficult. Figure A2.17 Hourly Earnings Distribution for Employees Aged 18 or Over in the Social Care Sector, April 1998—April 2000 
Source: Grossed NES data, April 1998—2000 Employment 47. The number of people employed in the social care sector has remained fairly stable, at around 430,000 employees, over the past three years. There has been little change in the composition of the workforce over that period. In December 2000 about half of employees worked part time and 85 per cent of employees were women. The Training Standards Council found that ‘the care sector struggles to maintain a qualified and experienced workforce. Pay and conditions are poor, and there is high staff turnover’ (Training Standards Council, 2000a). Childcare Over half of respondents in our survey said the National Minimum Wage had affected their business in some way. Median earnings for childcare occupations were £4.88 per hour and lowest decile earnings were £3.89 per hour in 2000. Many employers have increased their fees as a direct result of the National Minimum Wage. Earnings 48. The impact of the minimum wage on earnings in childcare occupations can be seen in Figure A2.18. Two per cent of employees were earning around £3.60 per hour in April 2000. The data for 2000 show a spike at around £4.60 per hour. Increases at the bottom of the earnings distribution for childcare occupations are reflected in the increase in lowest decile earnings between 1998 and 2000, from £3.36 to £3.89 per hour. Figure A2.18 Hourly Earnings Distribution for Employees Aged 18 or Over in Childcare Occupations, April 1998—April 2000  Source: Grossed NES data, April 1998—2000 49. IDS (2001a) reports starting rates of pay for nursery assistants between £3.30 and £3.80 per hour, with higher pay for those with qualifications. It found that qualified people working in local authority nurseries tended to be paid slightly more than their colleagues working in the private sector. Several nurseries reported that as a result of the introduction of the National Minimum Wage, they had increased rates for higher-paid staff in order to maintain differentials while others said they could not afford to do this. Our own survey found that three-quarters of respondents in the childcare sector affected by the minimum wage had increased pay rates for higher-grade staff. A quarter of the sample in the IDS research, and four-fifths of employers in our own survey, had increased their fees as a direct result of the minimum wage. Employment 50. The childcare sector comprises pre-schools/play groups, day nurseries, out-of-school clubs, holiday schemes and nannies. The numbers of day nurseries, out-of-school clubs and holiday schemes have grown steadily since 1990, while the numbers of pre-schools and play groups have shown a steady fall. The sector had an estimated 292,000 employees and voluntary workers in 1999 and turnover was estimated at 18 per cent (DfEE, 2000a). Most employees are women, and most are aged 22 and over. A small IDS survey of private day nursery employers reported that two-thirds had difficulty in recruiting staff (2001a). Textiles and Clothing
51. The impact of the minimum wage on earnings in the clothing and textiles sector is shown in Figures A2.19 and A2.20. The figures illustrate the difference in the earnings distribution between different parts of the sector. The National Minimum Wage has had less impact on the earnings distribution in the textiles sector than in clothing, footwear and leather. Indeed, even within this latter group the impact will vary. Analysis of the NES shows that in 1998 employees in the clothing sector were more likely to be low-paid than those in the footwear sector. In 1998 4 per cent of employees were paid below £3.50 per hour in the textiles sector compared with 14 per cent in the clothing, footwear and leather sector. For the clothing, footwear and leather sector the minimum wage rate is the peak in the distribution in 2000, while in the textiles sector the peak is currently at a rate of around £5.00 per hour. 52. Increases at the bottom of the earnings distribution in the clothing and textiles sector as a whole are reflected in the increase in lowest decile earnings between 1998 and 2000, from £3.53 to £4.00 per hour. IDS (2000b) found that many industry agreements concluded in 2000 were low compared with other settlements in the economy. In some cases this was a result of large increases previously agreed to meet the minimum wage, but the strong pound and overseas competition were much more significant. Figure A2.19 Hourly Earnings Distribution for Employees Aged 18 or Over in the Textiles Sector, April 1998—April 2000  Source: Grossed NES data, April 1998—2000 Figure A2.20 Hourly Earnings Distribution for Employees Aged 18 or Over in the Clothing, Footwear and Leather Manufacturing Sector, April 1998—April 2000  Source: Grossed NES data, April 1998—2000 53. IDS (2000b) found that some companies paying basic rates close to the National Minimum Wage or higher were finding it difficult to compete with other sectors for staff. They also found that in some cases the National Minimum Wage had squeezed the proportion of earnings derived from performance payments, making it more difficult to provide financial incentives to improve productivity. Some firms consolidated performance bonuses into the basic rate to bring it up to or above the National Minimum Wage. Our own survey of employers reported that firms with incentive schemes were more likely to have been affected by the National Minimum Wage. 54. The most frequent comment made by respondents to our survey of employers is that the greatest impact on the textiles and clothing sector has been from overseas competition. In its report in June 2000 the Textile and Clothing Strategy Group — established by employers, unions and the Government — commented that the adverse movement in the balance of trade in the UK textiles and clothing industry is due to a combination of macro-economic factors, including the devaluation of Asian currencies and the general weakness of the euro and related European currencies. The report also noted that the majority of those who commented on the draft report stressed the latter factor above any other as a cause of the current downturn in the industry’s fortunes. Employment 55. Employment in textiles and clothing has been falling since the 1980s, when the sector employed over half a million people. By December 2000 employment had declined to just over 200,000. There is little evidence that the decline in recent years has resulted from the minimum wage. IDS (2000b) concluded from its research that ‘there has been no noticeable acceleration in the rate of redundancies since the introduction of the National Minimum Wage’. 56. Employment in the sector is concentrated in the East Midlands, Yorkshire, the Scottish Borders and Northern Ireland. Around half of the employees are women and the vast majority of employees work full time. Around half of employees work in clothing and knitwear; half work in textile manufacture, which tends to be more capital-intensive. Hairdressing
57. The impact of the minimum wage on earnings in the hairdressing sector is shown in Figure A2.21. Nineteen per cent of employees were paid less than £3.60 per hour in April 2000. The percentage of employees paid less than the main minimum wage rate has remained relatively high compared with other sectors; this is partly because the hairdressing sector makes more use of the youth Development Rate and training exemptions than other sectors. Evidence from our own survey showed that 45 per cent of employers in the hairdressing sector said that they make use of the youth Development Rate compared with 18 per cent of employers overall. Increases at the bottom of the distribution are reflected in the increase in lowest decile earnings between 1998 and 2000, from £2.32 to £3.25 per hour. The median rose from £3.85 in 1998 to £4.19 per hour in 2000. Figure A2.21 Hourly Earnings Distribution for Employees Aged 18 or Over in the Hairdressing Sector, April 1998—April 2000  Source: Grossed NES data, April 1998—2000 58. Our own survey of employers found that hairdressers were the most likely group to report that they were being affected by the National Minimum Wage. They were most likely to report increased wage bills, tightened controls on labour costs, reduced staff levels, and increased prices. The June and October 2000 upratings affected them more than the other sectors in the survey. Two-thirds of all employers responding to our survey agreed that the June uprating had no effect on their businesses, while more than two-thirds of hairdressers said that it had. Similarly, just over half of employers agreed that the October uprating had had no effect on their businesses, but only a third of the hairdressers agreed with this statement. 59. The National Hairdressers’ Federation (NHF) conducted a wages and prices survey among its member salons, mainly small and medium-sized businesses. The results suggest that incentive payments by way of commissions at the bottom of the pay range have declined. In their evidence to us the NHF and the Hairdressing Employers Association (HEA) expressed concern that differentials supported by productivity and performance criteria were being eroded. They reported that this reduces the incentives available to encourage and reward better workers. Employment 60. The hairdressing sector consists of around 100,000 employees. The NHF and the HEA reported in their evidence to us that around half of employees are aged between 16 and 24, many of them trainees, and that around a third of employees work part time. They also report that the vast majority of employees in the sector are women. 61. One-third of respondents to the NHF survey reported that overall staff numbers had decreased in the past year. In their evidence to us the NHF and HEA expressed concern about the impact of the minimum wage, and other employment regulations, on the future profitability of salons and the future impact on employment. We were keen to include a project on hairdressing in our research programme for this report. The contractors we commissioned withdrew at a late stage and we therefore included an additional section of questions in our survey of low-paying sectors. We received good information from this and also from the hairdressing employers’ representative organisations. Because the impact of the minimum wage on the hairdressing sector appears to be greater than most others, we shall consider how to gather better information for this sector as part of our future research programme. | |
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