When Paul Smith first started running a pub in Stirling, in central Scotland, in 1981, the standard in the hospitality industry was for wages to represent about 10 per cent of turnover. He now runs bars, clubs and other venues across the country in an industry where staff costs absorb about 36 to 38 percent of sales.
“It has tripled in number during my time in hospitality,” says Smith, managing director of Castle Leisure Group. “There's no doubt that in the early 1980s, hospitality was rightly criticized as a low-wage sector. The industry has taken up that. You can no longer say hospitality is low-wage.”
This amazing progress is due in large part to one of the few policies that has received sustained support over time from both Labor and Conservative governments. The UK minimum wage, introduced by Tony Blair in 1999, rose steadily until 2015 – when the then Chancellor of the Exchequer, George Osborne, boosted its growth with the aim of raising the renamed “National Living Wage” (NLW) to 60 per cent of Average income. .
This week, the hourly rate will rise again by almost 10 per cent to £11.44 and reach two-thirds of average earnings, reaching the five-year target set in 2019 to end low wages, as defined by the OECD, and giving the UK a chance. one. Among the highest levels of wages in the rich world.
This is widely seen as a political victory: it has raised the living standards of the lowest paid people, without significantly harming their chances of finding work.
The UK is not alone in seeking to protect low-paid workers from rising costs of living, with Germany, France and New Zealand being among the countries that have rapidly raised their minimum wages in recent years – yet Britain has undoubtedly been among the most ambitious.
But UK ministers have now called for a halt to the continued upward rise in the minimum wage. Instead, the Low Pay Commission, which advises the government on where to set the minimum wage, has been given new powers to keep the headline rate for adults at two-thirds of average earnings, while seeking to raise lower rates for young people as quickly as possible. Without hitting job opportunities.
The pause will come as a relief to business leaders, who have warned that many small employers are finding it increasingly difficult to manage rising wage bills — many of whom have also raised wages for senior employees — and are beginning to make uncomfortable trade-offs.
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“While the target is laudable, it is not without serious consequences for many industries, including hospitality,” says Smith, who has cut trading hours and shift staff to control his costs. “We employ fewer people… If we pass everything on price, our customers won't be able to pay.
“The answer cannot be to continue to intensify work further,” adds Neil Carbery, chief executive of the Recruitment and Employment Confederation. With many smaller venues now closing two or three days a week because sales don't cover their costs, “we need a pause,” says Kate Nicholls, chief executive of trade body UKHospitality.
Worker advocates say they've heard similar warnings many times before — yet most companies have always adapted, whether by cutting profits, raising prices, automating, or finding ways to use employees better.
In the past two years, despite successive sharp increases in the NLW, the number of workers earning the minimum wage has actually fallen – against all expectations – because employers have found that they need to pay above the statutory rate to secure employees in a highly competitive labor market.
Kate Bell, assistant general secretary of the Trades Union Congress, says this makes the way forward for the NLW clear: “We think we can be more ambitious.”
But even proponents of higher minimum wages now say the policy focus should broaden to address other concerns about low-paid work, and boost living standards for people higher up the wage scale, whose incomes have been stagnant for more than 15 years.
“It's a very blunt instrument,” Alice Martin, head of research at Lancaster University's Labor Foundation, says of the policy. “The biggest challenges facing the labor market in the 21st century are not just about wages. Many workers do not have access to security.” Or the flexibility they need in their work.
In the absence of higher productivity — which remains elusive — employers can only manage higher labor costs by raising prices, accepting lower profits, cutting jobs, or squeezing wages in the country, says Nye Community, chief economist at the Decision Foundation. Other places. “At some point, these things are going to be painful,” he warns.
Labor has promised to ensure the NLW reflects people's true costs of living if it wins power in the next UK general election. But it is planning a broader campaign to restore union power and give workers more security and control over their hours and working conditions.
The local parliamentary committee also said that enforcing existing rules and addressing the precarious nature of low-paid work may achieve more than simply raising the minimum wage higher than ever before. “The NLW has been very successful but it is not a silver bullet… the incomes of low-paid workers can vary widely and many jobs offer very few hours,” she said in advice to ministers published last week.
Others warn that as NLW rises, there is an increasing risk that employers will cut contracted hours and demand more from staff – while struggling to offer the same opportunities for promotion.
There is also a widespread perception that jobs are becoming more stressful and less rewarding as employers begin to cut back on staff, with restaurant staff expected to cover more tables, office and hotel cleaners to cover more ground, and care workers to rush through more customers. .
Matthew, 29, who has worked at two branches of fast food chain Nando's over the past year, says his job there “got progressively worse” because many of the team members who left were not replaced – including supervisors needed to train new staff. Recruits.
“Throughout the summer and into Christmas, we were short-staffed,” he says. “Sometimes we had to leave customers waiting for an hour at the door, and stop Deliveroo – you have to be a strong person.”
Sometimes, this leads to outright abuse of the rules.
Tracy, the care worker, says that although she was paid above minimum wage, she was constantly out of money because her employer only covered petrol costs between visits, not on her way to her first client.
On the other hand, the main concern for employers is the high costs of maintaining pay differentials between entry-level jobs and those that paid much better for them.
In previous years, many major companies have allowed the gap between pay grades to narrow – for Matthew, a move to a supervisory role at Nando's would boost his pay by just 30p an hour.
But employers are reluctant to let the gaps between grades shrink further.
Nicholls says a 10 per cent NLW increase this week will lift overall wage bills by 17 per cent in the hospitality sector, because employers need to increase the wages of senior staff to maintain progression paths.
“We will have ended low wages, but with more people feeling low wages than ever before,” says Ryan Newton-Smith, chief executive of the CBI's business lobby, who sees the priority as raising productivity and wages across the economy.
She adds that the minimum wage is not enough to guarantee decent living standards. Although this policy officially put an end to low hourly wages, in-work poverty remains acute – for people unable to work long hours, or for those whose benefits have not risen in line with income.
Meanwhile, average income is no higher now than it was in 2008.
Paul Nowak, general secretary of the TUC, says a clear lesson can be drawn from the way companies have adapted to the NLW over time.
In 1997, “Britain was full of employers and employers' organizations who predicted that the minimum wage would lead to mass unemployment and economic devastation,” he says, contrasting this with recent business alarm about the potential impact of Labour's reforms on workers' rights.
“The arguments are exactly the same as they were 25 years ago… Now is the time to forge a new political consensus on tackling the scourge of insecure work.
