Minimum Wage, Maximum Complexity

There are few issues that generate as much debate and friction every year in retail life as the seemingly inevitable annual increase in the National Minimum Wage. The Low Pay Commission’s regular consultations often generate fierce debate around what is undoubtedly a very complex topic and it’s an issue that has taken on even more layers of complexity thanks to the Covid-19 pandemic.

Even the Low Pay Commission has been hit by the crisis with the consultation itself suffering from the effects of coronavirus. The original plan was for the consultation on the 2021 minimum wage rates to be launched on Thursday 12 March and run for 12 weeks with a deadline of Thursday 4 June, but lockdown put paid to that.

A carefully worded statement on the Low Pay Commission’s website read: “This deadline was originally set to allow time to read consultation responses ahead of in-person evidence sessions in July. We still intend to go ahead with these sessions, although may seek to hold them remotely.

“We recognise the difficulties our stakeholders may face in responding by this deadline. We will leave the formal deadline in place, but in practice will accept evidence presented to us up until mid-July“.

But a shift in the deadline for the consultation was not the only consequence of Covid-19. The remarkable role played by local retailers and their staff over the last few months and recognised formally in their official designation as key workers has, for many, reinforced their beliefs that many workers are under-valued and under-paid.

Paddy Lillis, General Secretary of trade union Usdaw is among those with that opinion.“We provided the Low Pay Commission with evidence of why we need a new deal for workers that includes at least £10 per hour and an end to youth rates. The Coronavirus pandemic has clearly demonstrated how reliant the country is on low-paid key workers.

“Millions of low-paid workers have provided essential services to help ensure the country is fed, healthy and safe through the lockdown and will continue to do so. Usdaw members employed in retail welcomed the key worker status, but that respect and appreciation must not fade into the background when this national crisis passes.

“There must be lasting and fundamental changes to the way society views our lowest paid workers. We need a new deal for the workers: a minimum wage of at least £10 per hour, an end to insecure employment, respect for shopworkers and action to ensure that retail jobs are no longer underpaid and undervalued.”

Usdaw is also demanding the abolishing of youth rates on the grounds that “under-25s are more likely to be paid less than older colleagues, even when doing the same job“.

The argument is not without its merits, but the flip side of the minimum wage coin is the straightforward commercial reality that retailers and retail industry bodies have been routinely highlighting year after year. In its evidence to the Low Pay Commission this year, the Association of Convenience Stores (ACS) once again outlined convenience retailers’ concerns about the impact that rising wage costs will have on the local, flexible and secure jobs offered by the convenience sector.

Among new evidence shared with Low Pay Commissioners at an oral evidence session, ACS explained that 70% of people working in the convenience sector felt valued in their current role, 72% expected to stay in their role in the next five years, and that the convenience sector has a higher proportion of workerson permanent contracts than the economy as a whole. The findings are from the ACS Colleague Survey, based on a sample of 2,000 people working in convenience stores.

ACS urged the Low Pay Commission to show restraint when setting the 2021 wage rate and to consider revising their longer term goal of the National Living Wage rate of reaching two thirds of medium earnings by 2024, currently projected to reach over £10 per hour.

ACS Chief Executive James Lowman says: “Local shops offer secure, local and flexible employment opportunities, but this model is under threat from rising wage costs and the use of gig economy employment by competitors. We have also seen that rising wage costs continue to lead to retailers reducing paid working hours and pay differentials, making it harder to recruit and reward store supervisors and managers.

“The Coronavirus outbreak is clearly going to impact sustained economic growth which is grounds for the Low Pay Commission to extend their longer-term targets.”

Written evidence from ACS to the Low Pay Commission outlined that convenience retailers have responded to the 2020 National Living Wage rate by increasing the hours worked in the business (64%), taking lower profits from the business (56%) and reducing staffed working hours (48%).

A very deep and complicated issue has only gotten even deeper and more complicated thanks to coronavirus. It’s a circle that looks impossible to square, but it’s one that our sector is going to have to wrestle with for many years to come.