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THE NATIONAL MINIMUM WAGE AND TRAINING Research report commissioned by the Low Pay Commission >>Back to main index 5. Analysis and Conclusion The differential impact of the NMW The impact of the NMW has been more significant in the depressed labour market of Resort Town, where many companies paid below it, than in County Town, where the state of the local economy means that companies have to pay above it if they want to recruit and retain labour. In this section, we analyse the impact of the NMW in the Resort Town context and also explore the extent to which increased staffing costs have contributed to a re-evaluation of training strategies. Although the NMW has not had the same impact in County Town, the case studies provide an opportunity to examine how employers in three low wage sectors deal with staffing and training issues in a labour market where they are obliged to pay above the NMW to recruit and retain staff. Employer’s responses to the NMW in Resort Town Some of the case study organisations had attempted to cut costs in response to the NMW. One care home tried to cut domestics’ hours and in the retail sector older staff were replaced by younger staff. These efforts were largely unsuccessful because these businesses were already pared down to the bone. A response reported by a number of owner/managers had been to take a cut in takings themselves in order to keep their business viable. This was particularly the case in the care homes and the Southern Hotel. It is difficult to assess the impact of the NMW at the Quay Hotel, because here the change of ownership makes comparison difficult. Where employers in Resort Town were obliged to increase their wages to comply with the NMW, many felt that they had to increase other staff wages to maintain differentials with for those with skills or long service. Others who were paying at or above the NMW when it was introduced, had to raise wage rates to maintain differentials. This was to retain staff and maintain staff morale in line with their image as ‘the best on the high street’ (for example, at the Department Store). Some now uprate their own wages at the same time as the NMW to retain this differential. Training as a response to the NMW We have little evidence of employers adjusting the to NMW by increasing their investment in training, although it is difficult to separate the effects of the NMW from other factors. In the residential care homes statutory requirements mean that the pressure is on to get 50 per cent of staff trained to NVQ level 2 by 2005 and employers must meet these if they want to stay in business. The NMW has therefore coincided with a range of additional costs for training, NVQ assessment and requirements to upgrade the physical environment at a time when local authority payments for services have not increased. Home-owners have a range of options. There is some evidence (but not from the fieldwork) of some selling up and leaving the sector altogether. Whilst some have adopted a reactive and piecemeal approach to each successive measure, others have developed a more proactive approach to business planning and are trying to anticipate future requirements and to professionalise their approach to staff management and training. In the hospitality sector in Resort Town the hotels were already adapting their business strategies to the changing fortunes of the holiday trade, and their training strategies reflected how they were trying to position themselves in the market. In the retail sector the Department Store and the Sports Shop were in niche markets and trained to keep abreast of new products and maintain their levels of customer service. Although the NMW had affected the former, insofar as it had raised wages to maintain differentials this seems unlikely to have been a major factor in its training strategy which was already well-established. Only the Newsagents used the Development Rate, but this was to employ young people at lower wage rates and was not linked to externally provided training. Nevertheless, the owner was investing in the training of his deputy manager, though it is not possible to say if this decision was linked to challenges presented by managing the impact of the NMW. The Development Rate, exemptions from the NMW and reduced wages as an incentive to train The research also sought to examine the extent to which the Development Rate for young people and adults and the exemptions from the NMW for apprentices serve as an incentive to employers to train. None of the case study organisations had used the Adult Development Rate. In some cases, this may have been due to lack of awareness of its existence, the absence of expertise in training and assessment and the difficulties of meeting the conditions for exemption. Alternatively, it may reflect the ways in which adult workers are recruited and employed in these sectors and employers’ preference for investing in the training of older staff who have built up a period of service rather than new recruits. In the same way, none of the organisations were using the exemptions for young people on recognised training courses. At the Seafront Hotel, the young chef interviewed had initially come to the hotel as a trainee on work placement. None of the other case study organisations were employing 16 to 17 year olds full-time on this basis, though they were being employed as part-time and casual staff. A number of employees expressed the view that young people required a lot of time-consuming supervision, which they viewed as a cost. There is some evidence of employers in care and hospitality recruiting young people at 18 once they have completed college courses, or in providing placements for students prior to their recruitment at 18. The case studies in Resort Town provide evidence of how employers have used the Development Rate for young people. This is an age-related exemption and it is not a requirement to achieve a recognised qualification. It is therefore useful to assess the extent to which it has been used to contribute to training. This takes a sectoral pattern which is discussed below. We found no examples of young people training on a Modern Apprenticeship. Although the Development Rate is not an issue for employers in County Town, the fieldwork findings provide an opportunity to assess whether the idea behind the Development Rate – of paying a lower wages to younger workers and to new adult recruits - affects employer’s propensity to train. None of the County Town employers felt that it was feasible to recruit younger or older people on reduced wage rates in return for providing training. If they wanted to recruit and retain staff, they had to pay the going rate. In care where there is more of an infrastructure for training because of statutory requirements, owner/managers felt they had to pay the going rate to recruit staff and wanted to pay them the same as established staff for doing the same work. A sectoral pattern in the use of the Development Rate for young people There appear to be a number of sector-specific models operating which reflect the local infrastructure and traditions of training. In the care sector, 18 to 24 year olds can get free training in NVQs and so can older workers on tax credits. This means, potentially, that 18-21 year olds can be paid on the Development Rate and receive free training and assessment. However, it is also the case that some home-owners are embarrassed at the rates of pay they offer and are often dependent on the goodwill of employees to run their homes in a context of staff shortages. Three of the homes employed young people on the Development Rate. One young person who was interviewed enjoyed the work, felt she was learning a lot in the work environment and was committed to a career in social work. She therefore found the wage rate to be an acceptable trade-off because of the quality of the work environment and the possibilities of career progression. In one of the homes, the Development Rate was paid to students on placements from college only. In the hospitality sector, there were different models operating for young people. At the Southern Hotel a traditional apprenticeship model operated for kitchen staff who were employed on the Development Rate and took day release training at a further education college. A modified version operated for young chefs at the Seafront Hotel, although here they were trainees at age 16 and 17 and then moved on to the Development Rate. The young people were combining on-the-job supervision in a rich learning environment with a college course leading to a formal qualification which would set them up for a career in catering. Although both owner/managers felt that there were considerable costs involved in time and effort in supervising young workers in the kitchen, they saw this craft training as a social responsibility and as a means of ensuring a sufficient stock of qualified workers from which they could draw. Although some other staff on the Development Rate receive training leading to NVQ qualifications in hospitality, this does not always offer the same quality of learning experience and sense of career development as in catering. Outside this craft apprenticeship model in the catering trade, the Development Rate was mainly used by employers to employ young people at a reduced rate of pay. If the Development Rate was being used, it was as an age-related scale and did not constitute a trade-off for access to training in transferable skills. It applies especially to seasonal, casual and part-time workers and they mainly receive in-house training in hospitality. In retail we only found two young people being trained to NVQ standards and they were both employed at the Department Store, where there was a highly personalised and paternalistic management style and approach to staff training. Although they were being paid on an age-related scale, this was above the Development Rate. Otherwise, the use of the Development Rate in this sector appeared to be a mechanism for paying lower wages to young people and at the Newsagents there had been a shift to employing more young people following the introduction of the NMW. The impact of the NMW where employers were already paying above it Some of the employers in Resort Town and all the employers in County Town had been paying above the NMW when it was introduced. In Resort Town their response had been to raise differentials and to do so at the same time that the NMW was up-rated. Although there was no similar effect in County Town, several employers said developments such as the NMW and the Working Time Directive had led them to look at their staffing policies more closely. Training and business strategies In the case study organisations in the hospitality and retail sectors training is largely related to customer service skills and is mainly provided in-house. In this respect, the quality of workplace learning depends considerably on the quality of the work environment, the need for developing product knowledge, interactions with other staff and customers. The extent to which it involves a significant investment in off-the-job training depends to a large extent how the company positions itself in relation to particular segments of the market and its competitors. In turn, this will be reflected in the type of staff who are recruited, the measures that are taken to retain them once in post, the types of external courses and qualifications they are offered and the internal career structure available to them. To what extent does the way in which the workforce is managed contribute to business strategies? Both hospitality and retail are labour intensive industries and rely heavily on the quality of staff interactions with customers to define the quality of the service they provide. Yet there appeared to be considerable variations in the extent to which the organisations were able to recruit, manage and retain staff. In some cases staff turnover appeared to be endemic and the employer’s view appeared to be that ‘they don’t stay, so there’s no point in training them anyway’. In others staff had a clear sense of loyalty to their employer and to the work they were doing, often remaining with them even though they were aware of better paid jobs elsewhere. Pay and training are two elements of the employment package which between them contribute, on the one hand, to the organisation’s business strategy, and to the management of labour, on the other. A number of the organisations in both Resort Town and County Town had positioned themselves in the quality end of the market and perceived a professional approach to management and the training of the workforce as central to their business strategies. Where staff were attending externally provided courses they expressed their appreciation of them and this was often linked to a commitment to the employer or to a career in the industry. The role of statutory requirements in supporting training Across the board, statutory requirements are a significant driver for training. These were most in evidence in social care and, to a lesser extent, in hospitality. Employers accept that this type of training is a requirement. Although some of the home-owners in the care sector saw the requirements for NVQ assessment and the Care Standards as a series of burdens to which they conformed to begrudgingly, others had adopted a more proactive approach. This involved developing a more systematic approach to planning their business and related training needs and recognising the significance of sources of external advice and expertise. Infrastructural support for training and business development In the course of the analysis we have highlighted a number of sources of external advice and support which have been significant to the organisations' business strategies. In addition to business and trade associations (such as the Association of Independent Retailers mentioned at the Department Store), local further education colleges appear to be the most common source of advice on training. There is some use of Chambers of Commerce, as well as training and recruitment agencies. Of the three sectors, the infrastructure in social care appears to be the strongest. It includes access to training resources in local authority Social Services Departments and, in the case of the Day Care Centre, to resources of larger voluntary organisations. A particularly significant development in County Town has been the appointment of a trainer in the Social Services Department with responsibility for statutory training in the private and voluntary sector. This has occurred alongside the establishment of a local employer network with the involvement of the sectoral training body, TOPSS. In part, this level of public provision reflects the role of local authorities as commissioners of care services and the government’s role in regulating them. The hospitality sector has some areas of traditional apprenticeship training and also uses day release for older workers who have some experience in the sector. This appears to be quite selective and aimed at more established staff whereas high levels of turnover may be tolerated amongst casual and seasonal staff. The role of advice from the government’s Small Business Service was mentioned by one County Town hotelier as being decisive in establishing his market strategy and approach to training for business needs. The retail sector appears least well-served by training infrastructure at local level. It may be that the nature of the industry and jobs in it mean that many employers feel that on-the-job training is adequate for their needs. There is some evidence from our study that levels of turnover are lower where product knowledge plays a greater role in customer service. Moreover, bench-marking against competitors, which involves sharing information amongst members of an association, can provide a resource contributing to service quality and to staff training and development. Concluding remarks The research findings suggest that there is little evidence of the NMW having a direct impact on companies' training and development strategies. Nevertheless, alongside other developments, such as the Care Standards requirements and the Working Time Directive, it is a factor contributing to companies' propensity to review the way they manage their workforces, including their training strategies. The precise form this takes is affected by the extent to which owner/managers adopt a pro-active or reactive approach to planning their business, where they situate themselves in the market and how they approach staff recruitment and retention more generally. The Development Rate is based on the assumption that employers will be more inclined to train young people and adults employees if they are paid below the NMW. We have found no examples of the use of the Adult Development Rate. We believe there are two reasons for this. Firstly, few small and medium sized firms have the capacity to meet the exemption criteria. Secondly, if they do invest in the training of older workers, typically this is for established workers rather than new recruits. We have found examples of the use of the Development Rate for young people but only in the depressed local labour market of Resort Town. In hospitality (particularly in catering) and care it is sometimes used for young workers undertaking NVQs. In these instances, the young workers saw the training and ensuing qualification as contributing to their career and felt that there is a reasonable trade off between reduced wages and the training received. However, outside social care and the traditional apprenticeship model in hospitality, it is simply a reduced wage paid to young people which has sometimes been used to off-set the costs associated with implementing the NMW for adults. There is little evidence of their receiving more than induction and on-the-job training. This supports the view that for reduced wages to serve as an incentive for training, there must first be a training infrastructure in place which employers perceive as being relevant to their business needs. | |
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