Sweatshop Britain is booming

EMPLOYERS have taken advantage of the abolition of the Wages Councils last year to freeze the pay of some of Britain's lowest-earning workers and offer jobs at well below the minimum rates set by the councils. But there is no evidence that cutting pay has increased the number of jobs on offer.

Jonathan Fry, of the Yorkshire Low Pay Unit, said some employers had even tried to slash pay rates for their existing workers, gambling on them not realising that this was an illegal breach of contract. 'One shopowner told an assistant that his pay would be cut from the old pounds 3.15 an hour statutory minimum to pounds 2 an hour. Fortunately we were able to prevent it.'

Mr Fry added that many employers were simply holding pay rates at the levels set by the councils last year and refusing to increase them. Workers reaching their 21st birthdays, who would previously then have come under the protection of the councils, found that their lot did not improve.

'One young man working in a hotel in York came to us just after his 21st birthday, wanting to know why his wages had not been raised from pounds 2.50 an hour,' Mr Fry said. 'Under the old system he would have to have been paid pounds 2.92.'

The councils covering hairdressing, shops, hotels and clothing manufacture were abolished last year, leaving the Agricultural Wages Boards as the last relic of minimum-wage legislation. Gillian Shephard, the Minister of Agriculture, has been reviewing their future and plans to announce her verdict in the next week or two. She was to have made an announcement before Easter, in which she was expected to reprieve the boards because they were supported by the National Farmers' Union. But the delay has made low- pay campaigners fear she may opt for abolition.

The timing of any announcement is delicate because of the Labour Party's embarrassment over suggestions that it was to back a national minimum wage of pounds 4.05, as some unions have argued. The Labour leader, John Smith, told the party's national executive committee last week that the party had yet to convince the public that a minimum wage was a good idea.

The Government has long argued that minimum wages destroy jobs because employers cannot afford to take on as many people. But a study commissioned by the Ministry of Agriculture from the London School of Economics found that the Agricultural Wages Boards created jobs rather than destroying them.

The LSE extended its analysis to the councils abolished last year and found that they also had a beneficial effect on employment. In addition they raised the pay of low earners and narrowed the gap between low- and high-paid workers.

Despite arguing that the councils destroyed jobs, the Government also maintained that wage rates would not drop sharply following their abolition. But Usdaw, the shopworkers union, complained last week that sweatshop pay rates were increasingly common. 'If such rates become the norm outside trade-union-organised companies, Usdaw is concerned that the decent employers will be forced to cut their rates in order to compete,' it said.

Usdaw found that a job advertised in a Jobcentre for a trainee chef in Faversham, Kent, offered pounds 35 for a 39-hour week - 89p an hour. The successful 16- or 17-year old applicant would also have to work split shifts and weekends.

A wider ranging survey by the Low Pay Unit found that about one-fifth of jobs advertised in Jobcentres which would previously have been covered by the Wages Councils paid below the old minimum rates.

Economists at Cambridge University's Microsimulation Unit argue that even relatively small cuts in hourly pay rates can make big differences to disposable income. A cut of 30p an hour would be enough to cut the income after taxes and benefits of the poorest tenth of the population by nearly 7 per cent. This might well be enough to make it more worthwhile for people to give up low paid work altogether and live-solely on benefits.