Employment: Workers face low blow in the war over wages: Scrapping wages councils will hurt the weakest, says Ian Hunter

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The Independent Online
THE COMPLETION of the Trade Union Reform and Employment Rights Bill's passage through the House of Commons is likely to bring misery to millions of low-paid workers. Among its provisions is the scrapping of the last of the wages councils, established in 1909 in an effort to protect the rights of people like Dawn.

Having left school, Dawn was taken on by an employer on a Youth Training Scheme. She undertook a part-time City and Guilds course at the London School of Fashion - passing after two years.

Despite her qualifications, her employer offered her only pounds 1.90 per hour, 24 per cent less than the legal minimum for the clothing manufacturing industry. Under the Trade Union Reform and Employment Rights Bill, Dawn would have had no redress.

Wages councils are independent statutory organisations that set minimum rates of pay for about 2.5 million workers. An equal number of employee and employer representatives, together with independent members nominated by the Secretary of State for Employment, sit on the 26 councils.

They regulate the basic minimum hourly rate in four main sectors - hotels and catering, the retail trade, clothing, and hairdressing. The minimum hourly rates negotiated last year ranged between pounds 2.59 and pounds 3.10.

These rates are set annually, and once approved, are legally enforceable. The system is policed by the Wages Inspectorate section of the Department of Employment.

Employers can be fined for underpaying, and their employees entitled to recover arrears of pay. According to the Low Pay Unit, 5,971 firms were discovered to be underpaying staff in 1991.

The Government believes wages councils are outdated. Gillian Shephard, the Secretary of State for Employment, said when the Bill was published last November: 'The wages councils were established when there were no employment rights, no general health and safety legislation and little social security provision. They have no role to play in the Nineties.'

This view is rejected by Chris Pond, the director of the Low Pay Unit. 'The gap between those on the national medium wage and those at the bottom of the scale is wider today than it was when the councils were first introduced,' he said.

He argued that in the European Community, only the United Kingdom and the Republic of Ireland failed to provide legal minimum wage protection in some form. Countries outside Europe, such as the United States, Australia and Canada, have national minimum wages. And Britain alone in Europe fails to provide employees with a general statutory right to paid annual leave.

The Government argues that wages councils threaten jobs. 'Where companies pay above the pay levels laid down by the wages councils, they are irrelevant,' Mrs Shepard said. 'Where wages councils force companies to pay more than they can afford, they destroy jobs. That is why the Government believes that the time has come to abolish them.'

Chris Pond rejects this argument as well. 'I believe Britain is following a policy of social devaluation by abolishing the wages councils,' he said. 'British industry will be less competitive. Its labour costs are already the lowest in the European Community.

'Low pay encourages firms to be inefficient. It holds down productivity, because employers have no incentive to invest in training or in modern plant and equipment. It also encourages a high turnover of staff. Without a minimum wage, the good employer will be undercut by the bad,' he said.

In addition, he pointed out, even the business community was deeply divided on the issue of abolishing the wages councils. 'Bodies such as the Confederation of British Industry and the lnstitute of Management, as well as large employers, such as Kingfisher and Sainsbury, believe the councils are useful and wish to retain them.'

But unless the House of Lords - which is currently considering the legislation - produces a late amendment to preserve the wages councils in the future, there may be more jobs and less pay for workers like Dawn.

(Photograph omitted)

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