Milking The Recession

MILKING THE RECESSION A Report by the Mandate Trade Union on The Assault on Retail Workers’ Pay and Terms and Conditions

MILKING THE RECESSION A Report by the Mandate Trade Union on the Assault on Retail Workers’ Pay and Terms and Conditions

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CONTENTS

Introduction by John Douglas General Secretary, Mandate Trade Union

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Milking The Recession: Executive Summary

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Milking The Recession

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MANDATE TRADE UNION

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Introduction by John Douglas General Secretary, Mandate Trade Union

This report is an important addition to the debate surrounding the economic crisis facing Ireland. The report also is a natural follow-on from Mandate’s earlier report entitled ‘End Low Pay’ which clearly showed that lower-paid workers and their families fared badly in terms of income and wealth distribution during the so-called boom years. It is those most disadvantaged and marginalised groups in our society who gained least during the economic boom who are now being targeted disproportionately to carry the burden of poverty, job losses, house repossessions and inequality as a result of government and employer policies put in place to address the current economic crisis.

The economic model which has now crashed, causing devastation to countless workers and their families, was fuelled by greed and the self interest of powerful groups in society, supported by the political policies of a government drunk on the illusion of economic success based on an unsustainable, unregulated financial system which was devoid of values.

From the ashes of the financial and economic ruin they have caused we must ensure that a different economic order is created; one based on values of fairness and social solidarity. The cheer leaders of the old order must not be allowed to regain control. We have already seen them attempt to demonise private and public sector workers, attack pay and

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INTRODUCTION

conditions and target welfare payments while at the same time they support the spending of billions of workers’ tax revenue in bailing out banks and property developers.

Mandate Trade Union will not stand by and allow government or profitable employers to target workers and their families to carry the burden in sorting out the economic mess. We make no apologies for resisting profitable employers milking the recession by cutting wages and conditions, by reducing hours and by attempting to force through phoney redundancies so as to increase their profits.

But as a responsible trade union Mandate has and will engage with employers who are suffering genuine economic difficulties. We will enter into long-term agreements with employers which protect jobs, provide a decent income and value workers as genuine stakeholders in the enterprise with a shared future.

These cases are special cases and should not be used as a battering ram to beat down the conditions of other workers either in the private or public sector. Those who attempt to do so are the very pundits who were the cheer leaders for the rip-off merchants who milked the boom and who now want to milk the recession.

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MILKING THE RECESSION: EXECUTIVE SUMMARY

Milking The Recession: Executive Summary

Introduction: Over recent months Mandate has witnessed an aggressive and determined attempt by many companies in the retail sector to drive down pay and undermine the terms and conditions of low-paid workers. This strategy is always framed against the current economic climate, with highly profitable companies, enjoying healthy trading conditions, seeking to achieve significant payroll reductions under the guise of ‘economic necessity’. Companies are using the recession to try and force through a long-held ambition to destroy long-fought for employment standards, reduce the wages of employees and ultimately increase already healthy profits. In short, they are milking the recession.

Low Pay in the Retail Sector: Pay in the retail sector, especially for those outside the managerial level, is low. Shop floor workers earn a salary substantially below the average industrial wage.

For many years new entrants will survive on a wage barely above the national minimum wage level. Previous research commissioned by Mandate revealed an average starting wage of just €9.09 per hour in the retail sector. After ten years of service this rate, on average, rises to just €13.57 per hour. These low pay rates were confirmed in a 2008 report by FGS Consulting for Forfás.

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The Retail Sector In Ireland: The retail sector in Ireland has enjoyed phenomenal growth and record profits over the past decade. Many retailers in Ireland have considerable retained profits, built up during the years of economic boom. While retail profits soared, wage increases in the sector remained moderate throughout the past decade. Value of sales growth and profits always outstripped wage growth.

The economic downturn has had an impact on the retail sector.

However, the impact has not been uniform and many companies still enjoy good trading conditions and healthy profits. Headline figures for the decline in the retail trade are often misleading as they include figures for the motor trade, electrical items and the bar trade which have been particularly hard hit over the past 18 months. For instance, CSO final figures for the year to August 2009 show: • Volume of sales in the motor trade sector dropped by 24.5% • Volume of sales in the electrical goods sector dropped by 11.1% • Volume of sales in the bar trade dropped by 8.8% • Volume of sales in department stores dropped by 5.6% • Volume of sales in food and beverage businesses dropped by 5.9% • Volume of sales in the pharmaceuticals and cosmetic sector dropped by just 2.1% • Volume of sales in non-specialised stores (including supermarkets) dropped by just 3.4%

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MILKING THE RECESSION: EXECUTIVE SUMMARY

Over the past 18 months Mandate has worked closely with retailers genuinely experiencing difficult trading conditions to ensure that a viable future for the business is in place. This has involved sacrifices by retail workers in an effort to maintain employment.

While Mandate will constructively engage with companies in this position we will not stand by while other companies, trading profitably, attempt to force major concessions from the workforce using the backdrop of the general economic downturn.

Milking the Recession: Recently Mandate has identified a strategy deployed by major retail operations to undermine wages at a time when many workers have genuine fears about job and income security. Many companies are attempting to: • Significantly reduce allowances paid for Sunday working, Christmas working, payment for late night or early morning shifts.

• Offer redundancy packages to workers with long service and replace them with new entrant workers on a much reduced hourly rate.

• Slash wage packets by employing workers for the bare minimum contractual hours, often spread over five workings days. This insidious tactic has severe implications for the work and family life of our members and grants enormous power to management.

• Use the prospect of minimal pay increases as a battering ram to undermine hard-fought for employment standards.

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Mandate’s Response: • Mandate will continue to stand by workers who are confronted with unfair and unjustifiable attempts to undermine wages and hard-won terms and conditions.

• Mandate will continue to recruit and advocate the benefits of trade union membership, particularly for those in the low-paid sector of the economy.

• On a broader level Mandate sees this campaign as part of the a wider campaign for social justice, fair play and common sense in the face of the economic downturn.

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MILKING THE RECESSION A Report by the Mandate Trade Union on the Assault on Retail Workers’ Pay and Terms and Conditions

Background: People working in the wholesale and retail sector in Ireland are among the lowest-paid workers in the country. Previous research published

by Mandate in 2008 reveals that, on average, a sales assistant earns a starting salary of just €9.09 per hour, a rate barely above the national minimum wage of €8.65. After 10 years of service the same sales assistant can expect to earn €13.57 per hour or €22,721 per year. In comparison the average industrial wage in Ireland is estimated at €34,000 per year.

These low wage levels persisted during a time when the retail sector in Ireland witnessed phenomenal growth in both sales and profits.

CSO data on the retail sector (excluding the motor trade) confirms this reality. The value of retail sales in Ireland grew by 43% between 2001 – 2007. The volume of retail sales increased by 31.7% in the same period.

During this period most retailers operating in Ireland earned massive profits, management enjoyed significant bonuses and retained profits grew and grew. However, the workers who were crucial to generating this wealth were told to display wage restraint. Retained profit levels had to be built up during the good times to ensure the sustainability of the business and the protection of wages and conditions in the

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inevitable downturn. Wage growth always lagged significantly behind profit and volume growth in the sector.

As we all know the inevitable downturn has arrived. Like every economic sector in Ireland the retail sector has contracted, although not by the amount that many business lobby groups would have us believe. After a decade of unprecedented and sustained growth the retail sector is retrenching, and in an increasing number of cases the first people to pay the price are the low-paid workers in the sector.

Over recent months Mandate has witnessed profitable firms with healthy businesses using the background of the wider economic downturn to attempt to force workers to take significant cuts in pay and conditions. In specific instances management have preyed on the fears that many workers have about job and income security in the current climate to drive through an agenda that will result in increased casualisation, lower pay scales and significantly reduced conditions of employment.

These companies are basically using the economic downturn to demand long-term concessions from workers at a time when most low-income families face the immediate future with uncertainty and worry. Our current economic crisis is being used as a smokescreen to facilitate a long-held ambition by some in the retail sector to create a casual workforce, emasculated by appalling contracts of employment and without professional representation by a trade union.

This is nothing more than blatant exploitation and crude opportunism.

Mandate is calling a halt!

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Changing Retail Environment in Ireland: The retail sector in Ireland is emerging from its most sustained and profitable decade of trading. The general contraction in the economy is having an impact on the retail sector, along with a number of other factors such as rental costs, cross-border shopping etc. However any shrinkage in the market must be viewed against the phenomenal double digit growth which was a feature of the past decade.

Mandate is absolutely committed to the protection of jobs in the retail sector. Over the past 18 months we have worked in partnership with a number of prominent retail businesses in Ireland that were encountering serious trading difficulties. In these instances the businesses have clearly demonstrated the challenges they were facing and worked with their employees and Mandate to achieve solutions that work.

The message is clear: where a company is genuinely struggling in the current market conditions Mandate and its members will not be found wanting and will play a constructive role in restructuring.

However, there are an increasing number of companies who, despite remaining profitable and enjoying good trading figures, are attempting to force workers to take unnecessary and unfair reductions in pay, allowances and terms and conditions. These pay rates and terms and conditions of employment have been long fought for and form an essential part of the family budget of thousands of workers. Employer demands for cutbacks are always conveniently framed against the background of the current economic crisis.

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While most of the retail sector is undergoing contraction the headline figures, and the data quoted by many business lobbyists, can often be misleading. A closer examination of the figures reveals huge disparity in trading conditions within the sector.

For example, the latest Retail Sales Index issued by the CSO covers the period from October 2008 to October 2009. The headline figure shows that the volume of retails sales dropped by 9.1% in that period.

However, a breakdown by business type reveals a much different picture, for example: • Volume of sales in the motor trade sector dropped by 24.5% • Volume of sales in the electrical goods sector dropped by 11.1% • Volume of sales in the bar trade dropped by 8.8% • Volume of sales in department stores dropped by 5.6% • Volume of sales in food and beverage businesses dropped by 5.9% • Volume of sales in the pharmaceuticals and cosmetic sector dropped by just 2.1% • Volume of sales in non-specialised stores (including supermarkets) dropped by just 3.4% In short the collapse in car sales and the significant fall-off in the licensed trade and the electrical goods market hide the relative ‘softlanding’ that has occurred that has occurred in many retail sectors.

If the motor trade and the licensed trade are excluded the fall in the volume of retail sales across all other sectors from October 2008 to

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October 2009 was 6.7%, a worrying trend but by no means a crisis that warrants the assault on low-wage workers.

Interestingly, preliminary CSO figures up to November 2009 indicate that the contraction in the volume of retail sales may have bottomed out with monthly sales (excluding the motor trade) showing positive growth in five of the last seven months.

If we look specifically at the volume of sales in department stores, food businesses, non-specialised stores (including supermarkets) and the pharmaceutical and cosmetic sectors, areas of the retail sector where the majority of Mandate members are employed, the average fall in the volume of retail sales from October 2008 to October 2009 was 4.25%.

Pay and Costs in the Retail Sector: As noted at the beginning of this report pay in the retail sector, especially for those outside managerial levels, is low. The sales assistants, shop floor workers and counter staff that everyone knows earn an annual salary far below the average industrial wage. For many years new entrants will survive on a wage barely above the national minimum wage.

A 2008 report by FGS Consulting for ForfĂĄs estimated that the average annual wage of a sales assistant in Dublin was â‚Ź22,000. The same person working in Cork, Galway or Limerick earned just â‚Ź17,500.

Despite the claims of some industry lobbyists pay rates in Ireland are not significantly higher than in the UK or other comparative European cities.

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For instance, according to the FGS Consulting report, a sales assistant in Cork, Limerick or Galway earns just €2,500 more per annum than a sales assistant in Belfast. A sales assistant in Maastricht in the Netherlands will earn €7,500 more per annum than their counterpart in Cork, Limerick or Galway.

A sales assistant in Dublin earns just €1,000 more than their equivalent in London, and they lag €3,000 behind the wage of their counterpart in Maastricht.

When examining relative rates of pay between different cities or jurisdictions it is also important to bear in mind the cost of living in each city. According to the Economist Intelligence Unit’s Worldwide Cost of Living survey published in February 2009 rated Dublin as the 13th most expensive city in the world to live in. By comparison London was ranked 27th.

Payroll costs form a relatively high proportion of operating costs in the retail sector not because wages are high but because it is a labour intensive business. The minimum wage rate is an important protection for low-paid retail workers in Ireland. A lower minimum wage rate (such as exists in the UK) only facilitates employers in driving down the pay rates of low-paid workers. That is the main reason for the relatively small difference in pay rates for low-paid workers here as compared in the UK. It’s not that Irish workers are paid well, it’s that workers in the UK are paid worse.

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Increasingly, Mandate has identified a trend whereby certain employers are aggressively setting the minimum wage rate as a benchmark target to be achieved. Increasingly workers in the retail sector who have given loyal service over a number of years and are on a higher pay scale are being offered voluntary statutory redundancy packages. If the worker chooses to depart they are replaced by new entrants at the lowest end of the pay scale and the company pockets the difference between the two wage rates.

Pressure is also being brought to bear on employees with long service whereby their hours are reduced to the bare contractual minimum number of hours, spread over five days of the week. This insidious tactic deprives workers of accessing the social welfare system to subvent their low pay, increases the pressure on balancing home and work life and effectively acts as a push factor for long-term employees on the upper end of the pay scales to avail of so-called redundancy packages.

The FGS Consulting report identified a range of areas, outside of payroll, where costs in Ireland are significantly ahead of the UK or our European neighbours. These include rental costs, utilities, telecommunications, professional fees and local authority charges.

However, when faced with a decline in the volume of retail sales many companies have focused solely on low-paid workers to deliver cost savings, savings these workers cannot afford to make. In these instances, the other major cost factors that are a significant drag on the retail sector have not been given the same priority. It is low-paid workers who are expected to pay the price.

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In the past year retail workers have been faced not just with a demand for pay rate reductions. They are in many instances also faced with a demand for a radical change in terms and conditions. Some companies are determined to issue new contracts of employment, contracts that would drastically reduce the minimum number of hours an employee can depend on each week. These short-hour contracts put the employee in an invidious position. The contracted hours will not deliver a living wage and the employee is dependent on securing additional hours to maintain their earnings. This gives enormous power to the management, increases casualisation and results in a degrading of the basic conditions of employees.

Mandate has also witnessed examples of staff on existing contracts confronted with a drastic cutback in hours. For instance, many retail workers have contracts of employment for perhaps 20 hours a week.

In reality they have worked 28-32 hours for a long period of time, and this effectively becomes that person’s established working week.

In recent months we have seen retail management severely paring back workers’ hours to the bare contractual minimum. This results in massive reductions in take-home pay, while outgoings such as childcare etc. remain high. Workers also become increasingly dependent on management for additional hours to achieve a decent weekly wage, and hence are less inclined to challenge management when serious workplace issues arise. The paring back to minimum contract hours also results in every worker having to do more for less pay as retail stores continue to operate at full tilt with minimum staffing levels.

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Recent Examples of Blatant Opportunism: A) Pharmacy and Cosmetic Sector: As noted earlier the pharmaceutical and cosmetic sector recorded the smallest contraction in volume of retail sales in the year to 2009. The sector contracted by just 2.1%.

However, that hasn’t stopped one major international retailer in the sector attempting to force significant cuts in pay and terms and conditions on its employees in Ireland. Just to place these outrageous demands in context the company posted a profit of approximately €20m for its Irish operations in the year to March 2008.

Despite its healthy trading record in Ireland the company is aggressively seeking to drive down costs by reducing the pay and conditions of its staff.

Some of the key changes the retailer is trying to force through include: • A 15.5% cut at the top of the pay scale, reducing it from €14.20 to €12 per hour.

• A 25% reduction in public holiday pay.

• A 25% reduction in the allowance for Sunday working.

• Increased power for management over weekend working rosters.

The company is intent on destroying 10 years of constructive partnership with its employees and Mandate with its aggressive

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approach to achieving these drastic cuts. The company has withdrawn from the State’s established labour dispute resolution machinery and is seeking to impose these cuts unilaterally. The nature of the cutbacks proposed and the aggressive management attitude in relation to this issue have left staff with no opportunity but to ballot for industrial action.

B) Grocery and Drapery Sector: A number of companies with a very prominent position in the grocery and drapery sector in Ireland are currently attempting to impose significant cutbacks.

In a number of cases some companies are using the prospect of payment of National Agreement increases to gain major, long-term concessions on terms and conditions from employees. In all these cases the terms and conditions, such as allowances for working on Sundays or at Christmas, allowed the companies involved greater flexibility and longer opening hours as the retail sector adapted and benefitted from changing social patterns.

In short the terms of the National Pay Agreement are being used in these instances as a battering ram to introduce significantly reduced take-home pay and terms and conditions for employees. It is an abuse of the principles of National Agreements and most certainly challenges the notion of the social partnership model.

The modest pay increases proposed in the National Agreement are not a bargaining chip to be used by employers to wring concessions out of workers. They are increases agreed between the social partners

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and Mandate will continue to work to see this Agreement honoured by hugely profitable companies enjoying good trading conditions in the retail section.

Example 1: Major Grocery and Drapery Retailer One of Ireland’s leading grocery and drapery stores, which employs approximately 11,000 people in Ireland, has sought major concessions from its workforce. This international business has recently posted record profits in excess of £3 billion sterling, and its Irish operations contribute significantly to this huge profit.

The company has dangled the prospect of the payment of monies owed under the National Pay Agreement, but only if major concessions are forthcoming. Among the concessions that management have been aggressively pursuing are: • Suspension of allowances for late night, early morning and overtime work.

• Significant undermining of terms and conditions of workers protected by a transfer of undertakings agreement when the company entered the Irish market.

Example 2: Major Grocery and Drapery Retailer This Irish-based company, with international operations, employs approximately 17,000 people throughout Ireland and parts of Europe. For the past number of years it has adopted an extremely aggressive and dismissive attitude towards its workers and their trade union, Mandate.

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A Labour Court recommendation from May this year noted that the company failed to appear before the Court and urged it to honour both the spirit and intent of a collective agreement the company and Mandate had signed over a decade ago.

At present the company operates in a unilateral and high-hand fashion in terms of industrial relations, continually seeking concessions across a range of issues from staff.

Recently, it has introduced a highly questionable statutory redundancy scheme. The scheme offers employees only statutory redundancy terms. The company can then claim 60% of the cost of these payments back in a rebate from State funds.

The redundancy scheme enables the company to replace workers on a higher pay scale with workers on a much lower pay scale. The company shoulders little of the cost of redundancy and pockets the difference in pay rates between workers.

Example 3: Major Drapery Retailer This company has a major presence in the high street retail clothing sector and has enjoyed over a decade of continuous profitable trading in Ireland.

It has ignored the terms of the National Pay Agreement, despite never attempting to put forward an ‘inability to pay’ position. Instead it is proposing a minimal pay increase, below that of the National Agreement in return for significant concessions. The minimal increase

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would not be backdated to May, when the National Agreement increase was due to workers.

If the company is successful the vast majority of workers would be worse off under the new regime.

Among the concessions sought are: • Reduction in allowances for Sunday working • Reduction in allowances for work over the Christmas period Conclusion: Mandate is deeply concerned at the aggressive attitude and approach adopted by some employers in the retail sector during recent months.

These employers enjoyed phenomenal growth, positive trading conditions and huge profits during the past decade. On the other hand the workers who helped create these profits demonstrated wage restraint throughout the period.

Now, at the first sign of a contraction in business, it seems that some employers believe that low-paid workers can be targeted to shore-up the huge profits made in previous years. Mandate believes it is doubly unfair that low-paid workers who benefited least during the so-called boom years are first in line for pay cuts and reductions in terms and conditions at the first sign of a change in trading conditions.

Mandate has engaged positively with employers experiencing genuine trading difficulties in recent months. Workers have demonstrated

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tremendous understanding and generosity in situations where the recession has had a demonstrable severe effect on the sustainability of a business. Our members have not been found wanting when tough measures have to be taken to ensure employment and the viability of a business. Mandate will continue to respond to genuine cases in a constructive spirit.

However, we will not tolerate other employers, be it in the private or public sector, who try to use these cases as a precedent for the wholesale assault on hard-won employment standards that benefit the lowest paid and often most vulnerable families in the country.

Mandate will: • Continue to stand by workers who are confronted with an attempt by employers to use the general economic downturn to unjustifiably undermine wages and terms and conditions. • Advocate the positive benefits of trade union membership, especially for low-paid workers in the economy. Our union will continue its active recruitment campaign to ensure that workers confronted with aggressive cost-cutting strategies are not isolated and vulnerable. We will provide the professional representation and the support and solidarity that flows from membership of a trade union. • Use all avenues available to use to highlight the activities of some employers in the retail sector.

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On a wider level Mandate sees this campaign as part of the broader campaign for social justice and common sense in the face of the economic downturn. Mandate fully supports the Irish Congress of Trade Unions’ ‘Get Up, Stand Up’ campaign.

Now, more than ever, values have to play a central role in public policy.

Values of social solidarity, values of fairness, values of equality are essential as we, as a country, chart our way out of the current crisis.

Some are proposing that we destroy the fabric of society, in an ideological- driven approach to ‘save’ the economy. It makes no sense. It actually plays into the agenda of the bankers and property speculators that brought us to this point.

Low-paid workers who benefitted little from the so-called boom years cannot now be expected to bear the brunt of cutbacks. We cannot accept that basic welfare payments, and many Mandate members depend on schemes such as Family Income Supplement and the Back To School Allowance payment, will be cut while a wealthy tier in society escape both scrutiny and sanction.

Fairness is essential. We need to see fairness in the retail sector.

We also need to see fairness across society as we face unprecedented challenges. Mandate’s campaign against unscrupulous attempts to drive down wages and terms and conditions in the retail sector is part of a broader campaign to see fairness in public policy at this crucial time.

Where to find us Mandate Head Office O’Lehane House 9 Cavendish Row Dublin 1

Mandate Organising and Training Centre Distillery House Distillery Road Dublin 3

Tel: 01 874 6321 Fax: 01 872 9581 Email: mandate@mandate.ie

Tel: 01 836 9699 Fax: 01 884 4114 Email: mandateotc@mandate.ie