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THE NATIONAL MINIMUM WAGE AND EMPLOYERS' TRAINING DECISIONS
Research report commissioned by the Low Pay Commission >>Back to main index Part 3 - Results from the preliminary telephone contacts A total of 175 employers were contacted by telephone during the months of January – April 2002. In all, 88 retail organisations were contacted, 55 hospitality organisations and 32 hairdressing salons. Of those contacted, 56 were not prepared to answer questions, giving a total of 121 who gave answers to some or all of the questions (1). Geographical distribution and proportions of micro-businesses, small and medium-sized enterprises Micro-businesses (those employing fewer than twenty employees) constituted the majority of businesses contacted. Small enterprises (between 21 and 50 employees) and medium sized businesses (more than 50 employees) together made up around a third of those questioned. Table 3.1 shows the distribution of enterprises by size, sector and geographical region. Table 3.1: Geographical distribution and size of enterprise surveyed | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| It should be noted that, in the main, retailers and organisations in the hospitality sector made up almost all of the small and medium sized enterprises, with hairdressers almost entirely being micro-businesses. The two exceptions to this were one large salon and training school, and one chain of hairdressers, both located in the London region. What proportions of respondents were affected by the NMW? Respondents were asked if they had been affected in any way, whether directly or indirectly, by introduction of the NMW. Table 3.2 shows all responses received to this question. Proportionally more hairdressers (65%) appeared to have been affected by introduction of the NMW than those in hospitality (58%) or retail (40%). Table 3.2: Proportion of employers across the three sectors that reported having been affected by introduction of the National Minimum Wage. * Note: ‘affected’ includes those who indicated that they had been only marginally affected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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However, within the hospitality and retail sectors, out of those reporting that they had not been affected, ten (two in hospitality, eight in retail) said that they were either family businesses (and so the NMW did not apply to them) or they were sole traders and hence did not employ anybody. If these are excluded from the figures and the percentages re-calculated for only those companies that have employees, then proportions of employers reporting that they were affected by the NMW across the three sectors are 65%, 61% and 46% for hairdressing, hospitality and retail, respectively (Table 3.3). Table 3.3: Proportion of employers across the three sectors that reported having been affected by introduction of the National Minimum Wage, excluding family businesses and sole traders *Note: ‘affected’ includes those who indicated that they had been only marginally affected | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Regional impact of NMW There were regional variations in the extent to which employers reported having been affected by the NMW. Table 3.4 displays the percentage of employers in each region reporting that they had been affected by the introduction of the NMW. Again, sole traders and family businesses have been omitted from the dataset. Table 3.4: Regional percentages of employers reporting that they had been affected by the introduction of the national minimum wage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Scotland, the Midlands, and the North were the areas in which the highest proportions of those employers interviewed reported being affected (78%, 78% and 63%), with Wales and the South West having the next highest proportions (54 and 52%). Size of workforce and impact of NMW It might be expected that smaller companies would feel the impact of the NMW more than would larger employers. However, this was not borne out by the data from the original telephone interviews. Table 3.5 shows that similar proportions of employers across the three size groupings reported having been affected. Table 3.5: Proportion of micro, small and medium-sized enterprises reporting that they were affected by the national minimum wage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Changes to training provision Employers were asked if they thought that training provision in their company had increased, decreased or remained at about the same level over the past three years. Table 3.6 shows the responses to this question by sector. Overall, 43% of those replying reported that they had increased their level of training over the past three years. There were only eight percentage points difference between the sectors, with the highest proportion being amongst hairdressers, 47% of whom had increased training, and the lowest being hospitality, with 39%. Just 12% reported that training had reduced, and a further 12% reported providing no training. It should be noted that no hairdresser reported providing no training at all, although one of those reporting that training had remained at the same level added that this was very minimal. Table 3.6: Changes to extent of training provided across the three sectors | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Employers were grouped as either ‘affected’ or ‘not affected’ by the introduction of the NMW, and the patterns in provision of training were then compared between the two groups of employers. Table 3.7 shows this comparison. Compared to those who had not been affected by the NMW, somewhat more employers who had been affected had increased their training provision (49% versus 36%); however, employers that had been affected by the NMW were also more than twice as likely to have decreased their provision (16% compared with 6%). Those who had not been affected by introduction of the NMW were more likely to say that training levels had remained constant over the past three years (36% compared with 25%). A larger proportion of employers who had not been affected by the NMW also reported providing no training at all (17% compared with 7%) Table 3.7: Change to training provision amongst employers affected and not affected by introduction of the national minimum wage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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There were differences in the proportions of larger and smaller employers regarding training decisions. Sixty-nine percent of large employers had chosen to increase training, compared to just 38% of smaller employers. Table 3.8 shows the breakdown of changes in training provision by size of employer. Table 3.8: changes to training provision in micro, small and medium sized enterprises | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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NB Three cases were not classified as having increased or decreased training as the respondents could not tell whether training provision had increased, decreased or remained the same Impact of the NMW Several themes emerged from comments made by employers during this early stage of the research, some of which subsequently emerged again in the later case studies. Impact on business Some of the smaller employers viewed the NMW as a ‘final straw’ that was making life difficult in the extreme. Two reported that they were considering closing: It crippled me. This is just a little business and I am struggling. The employees are earning more than I do, we are close to closing. Restaurant, Wales I am considering closing the business after 15 years if wages increase any more. I work 7 days a week and it is too much. Legislation is squeezing the small business out of the market. Health shop South West Another observed that their own salary did not meet minimum wage levels: As an employer I am not on the minimum wage myself. Retail florist, South West Number of employees There were indications that employers were having to reduce the number of people they employ as a means of coping with the NMW. At least nine of the employers who said that they had been affected by introduction of the NMW (15%) reported that they had reduced or were restricting the number of people they employed. In one case this had involved the individual reverting to life as a sole trader: After two years of not being able to afford the wages bill I am now working from home as a sole trader Retail florist, South West The NMW affects the number of staff we can employ. I’m employing fewer people now because we can’t afford to take on staff … I’m having to work behind the bar myself and the training has reduced because I’m not available to train the staff. Public house and restaurant, Wales I had to make two redundancies. Contracts/holiday pay/staff costs have increased by a third over the last two years. Bookshop, South West I have had to lay off two employees and increase my own workload…I am doing a 65 hour week. Convenience store, Midlands One person who was invited to take part in the later interview stage of the research but declined, saying ‘it would do no good’ described the situation in her region: There is no full-time work in this area – they [local employers] pay the NMW but the hours are reduced. Hairdresser, North of England In one case, the NMW had led to delay in converting a voluntary position to a paid post. A bookshop operated by a Church charity had been staffed by one manager, who was employed, and a team of volunteers. The volunteers included a person who held the post of deputy manager. The charity then decided to convert this position to a paid post. However, because they were unable to afford to pay the minimum wage, the deputy manager was forced to remain for longer as an unpaid volunteer before finally being appointed to the paid position. Positive views On the other hand, some employers did not perceive the NMW as a burden, and indeed, believed it was not set at a sufficiently high level: The NMW is not high enough – the cost of living has increased by 7%. Health shop, South West The NMW is too low – we pay higher than the NMW in appreciation of our staff. Public house, Wales Other concerns Four employers commented that changing demographics and changes in the nature of the economy were primarily responsible for the difficulties in recruitment now being faced by employers, rather than the NMW. These comments on recruitment problems were subsequently repeated as concerns voiced in the later case studies. There is a recruitment problem – young people are going into banking for more money – but they are mainly demographic reasons, not to do with NMW Retail florist, South West It’s difficult to recruit staff – young people are not coming into the trade anymore. Retail florist, Wales Recruitment has declined. There are more jobs with computers and pay can be better, they have more options available now. Hairdresser, London Conclusion to stage one Overall, the data indicates that significant proportions of both smaller and medium-sized companies in these sectors had been affected by introduction of the NMW. Proportionally more of those that had been affected by the NMW reported increasing training provision in the previous three years. Overall, fewer in the ‘affected’ group reported that they had decreased training provision, compared to those who reported that they had increased training. However, the proportion of ‘affected’ employers reporting a decrease in training was over twice the proportion in the ‘not affected’ group. In the case studies that followed the initial telephone profiling stage the reasoning that lay behind the changes in training provision was explored. Footnotes 1. Numbers vary between analyses as not all respondents replied to all questions. 2. One of these was not classified regarding changes to training as respondent could not tell whether training provision had increased, decreased or remained the same 3. Two of these were not classified regarding changes to training as respondents could not tell whether training provision had increased, decreased or remained the same 4. Of whom three were not classified for the above reasons | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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