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Low Pay Commission
8th Floor
Oxford House
76 Oxford Street
London
W1D 1BS
General enquiries:
020 7467 7207
Press enquiries:
020 7467 7279
E-mail:
lpc@lowpay.gov.uk
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THE NATIONAL MINIMUM WAGE AND TRAINING
Research report commissioned by the Low Pay Commission
>>Back to main index
Executive Summary
- This report addresses two major issues. These are the extent to which the National Minimum Wage has contributed incentives to employers to invest in training in general and whether the Youth and Adult Development Rates and the exemptions for under 18 year olds have provided specific incentives for the training of these categories of workers. It does this by exploring the relationship between training and the business challenges facing small and medium firms in three low pay sectors: social care, hospitality and retail.
- These sectors have different training traditions and infrastructures at local and national level. In the care sector, the Care Standards Act 2000 has set statutory requirements for the achievement of NVQ qualifications for the workforce and this is having a significant impact on training priorities. In hospitality and retail there are fewer statutory requirements. Although there are some areas of craft training in hospitality (such as catering), much of the training in these sectors is related to customer service and is provided in-house and on–the-job.
- The research explored the impact of the NMW and the Development Rate on employers in two local labour markets. These were Resort Town, where the NMW has had a significant impact in a relatively depressed local economy, and County Town, where all the employers interviewed paid above it when it was introduced.
- The research found no examples of the use of the Adult Development Rate. This can be ascribed to a number of factors. In social care, some of the case study employers are embarrassed at paying low wages but are constrained by local authority payment rates for clients which have not kept pace with costs. On grounds of equity they could not justify paying a reduced wage to new workers. In hospitality and retail, most of the small and medium-sized case study companies do not have the capacity to meet the exemption criteria. Even if they do, they prefer to train more established staff rather than new recruits, who may be recruited initially on a casual or temporary basis and may leave.
- The research found a number of examples of companies using the Youth Development Rate in Resort Town. Nationally, it is not widely used in social care and in Resort Town one home was using it whilst training a young worker to NVQ standards. In hospitality, two hotels were using it to train young chefs who were following an apprenticeship model of training combining on-the-job supervision and day release at college. In these examples, the young people felt there was a trade-off between gaining a qualification for a career in their industries and the level of their wages.
- Outside these areas, in the case study organisations, the Youth Development Rate represented an age-related rate of pay below the adult NMW and training was limited to induction and on-the-job training. Rather than encouraging employers to train, in one retail organisation adult workers had been replaced by less expensive youngsters.
- In the more bouyant labour market of County Town, employers felt they had to pay the local going rate to recruit and retain staff. Many were not aware of the Youth and Adult Development Rates but could not see how paying reduced wages could help them recruit the staff they needed. It is difficult to separate the influence of the NMW from other factors affecting business strategies and employers’ propensity to train. In the care sector, the Care Standards Act is the principal driver for training strategies and home owners have adopted more or less proactive business planning and training strategies towards compliance. In hospitality, the hotel owners in Resort Town were already adopting their market strategies to the decline of the tourist trade before the introduction of the NMW. Two of the retail companies had well established niche markets and training practices based on staff product knowledge. The newsagents was training a deputy manager to NVQ standards at college and this coincided with other adjustments to the NMW.
- Even where employers pay above the NMW, their awareness of it and other developments such as the Working Time Directive have, in some cases, prompted them to review their own employment practices and, in particular, the time of year at which they implement wage increases.
- Employers’ use of training to recognised standards and both older and younger workers’ access to it are conditioned by business strategy, on the one hand, and the presence of a local training infrastructure, on the other. This local infrastructure is most in evidence in social care where considerable government resources have been allocated to helping care homes meet statutory requirements. Local authorities, as commissioners of services provide support to this process and the sectoral training organisation, TOPSS, has been setting up local employer networks. Further education colleges are often a source of courses, assessment and advice.
- In hospitality the case study organisations also use further education colleges (and in County Town, a higher education institution as well) for training, but this is used selectively, usually for more established staff and young workers in specific occupations. However, this is also dependent on market niche; some make extensive use of internal and external training as part of their competitive strategy, whilst others prefer to recruit ready trained workers and focus on on-the-job learning.
- In retail, the local infrastructure supporting training is the weakest of the three sectors, although two case study organisations were training staff to NVQ standards at further education colleges.
- For reduced wage rates to serve as an incentive for training rather than job substitution, there must first be a training infrastructure in place which employers perceive as being relevant to their needs.
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