Minimum Wage Legislation in Northern Ireland
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Minimum Wage Legislation in Northern
Ireland
JOHN DITCH and RICHARD STEELE
John Ditch is a lecturer in Social Policy, Ulster Polytechnic, and Richard
Steele is a lecturer, Law Faculty, Queens University, Belfast. They are
cooperating in a SSRC-funded research project 'Family poverty and the
low-paid in Northern Ireland'. This article arises from that work.
Northern Ireland has long been characterised by low wage
structures. As in Britain and the Republic of Ireland, attempts
have been made to protect the wage levels of low-paid workers
through the operation of minimum wage legislation in certain
industries using the medium of wages councils.1 The social
implications of low pay in the province have been dealt with
elsewhere2 and it is therefore the purpose of this paper to
outline the developments, principal objectives and diverse
implications of minimum wage legislation in Northern Ireland.
We conclude by identifying the difficulties which need to be
considered if the position of low-paid workers is to be effectively
protected and improved.
Definition of low pay
Defining low pay is a complicated business rather like defining
the proverbial elephant: we all know one when we see it but
find it impossible to define: there is no single or consensually-
accepted approach and the general literature reflects this
inherent ambiguity.3 In Northern Ireland the definition of
what constitutes 'low pay' is no clearer than in either Britain
or the Republic of Ireland. However the most common method
is to use the data from the New Earnings Survey (Northern
Ireland) which establishes a general distribution of earnings
for those employees of the Pay-As-You-Earn (PAYE) scheme
and for whom Inland Revenue tax offices hold deduction cards.
(This method of data collection excludes the very low paid and
adolescents. To that extent it exaggerates average earnings.)4
A cut-off point is then selected equivalent to either the lowest
decile of earnings or those earnings which fall at or below
317318 Administration, Vol. 31, No. 3 two-thirds of the median. In the event there is a gross/approximate equivalence between these points, and both correspond roughly to the Supplementary Benefits level (the gross earnings equivalent) received by an unemployed male with a dependent wife and two children. Definitions of what constitutes poverty are no less fraught with difficulty. A re-analysis of the Eurobarometre data on the Perception of Poverty5 shows that respondents in Northern Ireland are even less aware of poverty than either GB or Eire respondents; furthermore they are most inclined to attribute poverty to individual/pathological causes and are suspicious and/or opposed to state intervention to alleviate the principal effects of poverty. The 'official' poverty line is determined by reference to the Supplementary Benefit scale rules for an unemployed person. How the scale rates are actually arrived at, and what they are meant to cover, is one of the great mysteries of Whitehall and regrettably one which the Depart- ment of Health and Social Services (NI) is obliged to unques- tioningly accept. There is, therefore, a close correspondence between the pragmatic definitions of low pay, poverty and the base Supplementary Benefit scale rate. However, much academic and pressure group argument and literature regards all these measures as parsimonious because they do not relate to real expenditure and consumption patterns as evidenced by such government surveys as the Family Expenditure Survey and the Family Finances Survey and the Family Resources Survey. Therefore there is a tendency for this definition to considerably under-estimate the extent of deprivation.6 A more realistic poverty line is determined by reference to the Supple- mentary Benefit scale rate for a married couple and two children plus 40 per cent. The Department of Economic Development in Northern Ireland do not use a single definition of low pay and the Policy, Planning and Research Unit of the Department of Finance refer not to poverty or low pay but to 'income deprivation' determined by reference to the 140 per cent Supplementary Benefit cut-off point or net-normal incomes. For purposes of comparison with GB, a formula is used to provide an Equiv- alent Net Normal Income which standardises the comparative data for variation in family size and age composition. This
Minimum Wage Legislation 319 does represent a relatively new departure and there is some evidence that the data (and conclusions) derived from this methodology are not well received by either the DHSS or government ministers who would prefer a more restrictive definition of income deprivation related to the base Supple- mentary Benefit rate alone.7 It is evident that the Statutory Minimum Level of Remu- neration set by the wages councils are lower than any of the cut-off points established by the methodologies associated with any of the above definitions. History of minimum wage fixing The early development of minimum wage legislation in Northern Ireland is closely linked with that of Britain. The Trade Boards Act, 1909 applied to Britain and Ireland. Under that legislation, trade boards, autonomous bodies consisting of equal representatives of employer and employee interests and a smaller number of independent members could set legally enforceable minimum wage rates for workers within their scope. In Ireland, five boards were established, tailoring, paper box, shirtmaking, sugar confectionary and food preserv- ing and linen and cotton embroidery. Following the reports of the Whitley Committee, the 1918 Trade Boards Act was enacted which provided that boards could be established for those trades where wages were low and where no effective machinery to regulate wages existed. A further 14 boards were established in Ireland by 1921. With the setting up of a separate Northern Ireland govern- ment in 1921, responsibility for the operation of the trade board system was transferred to the newly-constituted Minis- try of Labour. In 1923 the Ministry of Labour established a Committee of Inquiry chaired by Lord Dufferin to determine whether or not there was a need for the retention of the system. With the exception of evidence given by employers in trades such as paper box, aerated waters and milk distribution who argued either that the machinery was too slow and cumber- some or that their trades were sufficiently well organised, the evidence received favoured the retention and reform of the system. In a unanimous report the Committee found in favour of the trade board system. The government accepted the
320 Administration, Vol. 31, No. 3 Committee's recommendations and the Trade Boards Act (NI), 1923 was passed consolidating and partially reforming the 1909-18 legislation. The trade board system operated until 1945 when it was superceded by the Wages Council Act (NI) which modernised the system. This legislation mirrored the British 1945 Wages Councils Act and completed its passage through the Northern Ireland House of Commons and Senate without a division, the then Minister of Labour, Mr Maginnis stating that the need for minimum wage protection in certain industries had been accepted 'as a matter of history for some time'.8 Since 1923 three new wage-fixing bodies have been established - Agricul- ture Wages Board in 1939, Road Haulage Wages Council in 1948 and Catering Wages Council in 1965 - each with the broad support of employers and workers in the industry. For example, hoteliers favoured the creation of a catering wages council to minimum wage rates because 'only through better wages and conditions would it be possible to encourage suitable labour to train for and remain within the Northern Ireland catering industry and thus produce greater stability and higher standards in the industry'.9 In addition, a number of wages councils have been abolished primarily due to the decline of the industry, for example the General Waste Reclamation Wages Council and the Linen and Cotton Embroidery Wages Council. For much of the period during which minimum wage legis- lation has existed in Northern Ireland between 40,000 and 60,000 workers have received protection at any given moment in time. The number of workers covered has fluctuated as wages councils have been either created or abolished, in par- ticular in the Catering and Road Haulage sectors. Support for a national minimum wage among unions in Northern Ireland is ambiguous. It is the policy of the Northern Ireland Committee of the Irish Congress of Trade Unions (NIC/ICTU) and indeed ICTU to establish a national mini- mum wage.10 Some unions, however, e.g. the Amalgamated Transport and General Workers' Union (ATGWU) are opposed to the minimum wage being legally enforceable because of the alleged tendency to undermine the processes of collective bargaining while others e.g. the National Union of
Minimum Wage Legislation 321 Public Employees (NUPE) favour a legally enforceable mini- mum wage. Other measures introduced to help the low paid in Northern Ireland parallel those made in GB in particular the introduc- tion of Family Income Supplement in the early 1970s and access to a range of other means-tested benefits such as rent and rate rebates, free school meals and the like. It is interesting to note that over 12,000 workers with dependent children are in receipt of Family Income Supplement and that two-parent families comprise 90 per cent of the register compared with less than 60 per cent in GB. Northern Ireland has also been included in the provision of various pay policies, negotiated and implemented by the Trades Union Congress, Confederation of British Industry and government for the UK as a whole. These particularly characterised the 1974-8 period of the 'Social Contract'. Objectives of minimum wage legislation The original objective was to secure fair treatment by employ- ers of their workers as regards payment of wages, and indirectly thereby to reduce poverty. Initially the legislation was aimed at the 'sweated' trades. Boards were established in trades where the wages prevailing were exceptionally low as com- pared with other employments. This aim was expanded in 1918 to provide minimum wage rates for workers in other industries where wages were low and no adequate negotiating machinery was in existence, a major objective of this being to safeguard the earnings of women in those trades. Following the Whitley concept it was envisaged that the boards would encourage the development of bargaining units from which free collective bargaining could evolve. These objectives remained when the trade board system was replaced by the wages council system. In addition the govern- ment stressed how such a system was 'designed to ensure stability in the relations between employers and their work people."1 Current facts As a result of economic decline and de-industrialisation the wages council system continues to contract. At present there
322 Administration, Vol. 31, No. 3 are nine wages councils comprising equal numbers of employer and worker representatives and a smaller number of inde- pendent members. They prescribe minimum wages, holidays and holiday pay for over 37,000 workers (8 per cent of NI workforce) employed in 5,300 establishments. Unlike the position in Britain, wages councils are not empowered to prescribe other conditions of employment. Over 60 per cent of the workers covered by wages councils are women who pre- dominate in the clothing, catering, food preserving and linen trades. In 1981 the Retail Bespoke Wages Council was abol- ished due to the decline of the industry and in July 1982 three wages councils, Dressmaking and Women's Light Clothing, Readymade and Wholesale Bespoke and Shirtmaking were amalgamated to form the Clothing Manufacturing Wages Council following an investigation conducted by the Labour Relations Agency. The Agricultural Wages Board prescribes minimum rates of pay and holiday entitlement for 4,200 agri- cultural workers. The minimum rates for general workers set by these bodies range from £55.00 to £80.00 per week (see Table 1). Five wages councils, however, (Baking, Boot and Shoe, Linen and Cotton Handkerchief, Paper Box and Road Haulage) set a range of rates applicable to different grades in the industry e.g. the minimum rates in Paper Box vary from £51.61 to £82.09 for a 37f hour week. The average holiday entitlement is 20 days per year after one year's employment which approximates very closely to the average holiday entitlement for manual workers in the economy. Due to the inadequacies of the New Earnings Survey (NES) in Northern Ireland it is not possible to deter- mine with confidence the actual earnings of workers in indus- tries covered by wages councils and it is difficult to make comparisons with the minimum rates. In 1979 the Department of Manpower Services (now - after 1 September 1982 - the Department of Economic Development (DED)) did carry out such an exercise based on the NES and the October Earnings Inquiry. They were unable to draw any information on average earnings in Catering and Road Haulage - these two councils account for 90 per cent of employers and 50 per cent of workers covered by wages councils. The rest of the figures obtained showed that in 1978 the minimum rates ranged from 50 to 70
Table 1: Wages Councils and the Agricultural Wages Board in Northern Ireland
No. of No. of % Age
employers workers Female SMR Date inf orce applicable Holiday s
Baking 259 2,545 24 80.51 16 Ma y 1983 18 20
Boot and shoe 31 63 7 71.00 23 M ay 1983 21 20
Cate ring 3,239 11, 188 71 58.44 15 August 1983 18 17 ~
;:;.
§.
Clothing 168 10,160 93 59.35 21 March 1983 18 20 l:::
~
Laundry 13 372 75 60.00 22 August 1983 19 15 ~
~
~
Lin en and cotton handk erchief 57 1,477 88 58.22 1Jan.1983 18 20 ~
~
~.
Pap er box 12 773 47 55.61 1Jan.1984 18 21
~
5'
;:::s
Road haulage 1,496 6,643 - 80.95 27June 1983 21 20
Sugar, confectionery and food
preserving 41 264 70 68.75 26 Sept. 1983 18 21
Agriculture N/A 4,200 9 79.20 2 O ct. 1983 20 20
Total 5,316 37,685 w
~
w324 Administration, Vol. 31, No. 3 per cent of average earnings. No subsequent study has been conducted. Each wages council determines the minimum wage, holiday entitlement and holiday pay for its relevant industry. The procedure involved is lengthy. A meeting may be called by any member though it is usually done by someone from the trade union side. A council meets and following discussions, may issue a proposal to improve the minimum entitlement. This proposal is sent to all relevant employers. Following an objec- tion period the council will meet again, consider any objections and issue an order. A limited degree of backdating is allowed, to the date the proposal was issued. The wage-fixing machinery operates independently of government. Unlike the position in Britain there is no provision allowing for the creation of Statutory Joint Industrial Councils to act as a half-way house between wages councils and outright collective bargaining. This omission is surprising given that one objective of the system is to aid poorly organised industries develop effective bargaining practices. The enforcement of wages council orders is carried out by the Wages Inspectorate, a branch of DED. Inspectors are empowered by law to enter employers' premises, inspect wages, time and holiday records and ensure that wages orders are properly displayed. Employers in breach of the legislation are liable to fines of up to £100. If records are forged or false information provided an employer is liable to a fine of up to £400 and/or three months imprisonment. It has been the Northern Ireland experience that prosecutions are not brought. Instead an approach of gentle persuasion has been adopted. The wages council legislation is enforced by two full-time inspectors and a third civil servant on a part-time basis. During 1982 they carried out over 2,000 inspections, a very high daily rate. It is estimated that every establishment within the scope of the wages council system is inspected at least every three years - a much more frequent rate than in Britain. In spite of the low levels of minimum rates the inspectors continued to find instances of under-payment, most notably in the catering and road haulage industries. A total sum of £35,538 was recovered; £33,000 relate to under-payment of wages, the
Minimum Wage Legislation 325
remainder related to holiday pay outstanding. It is interesting
that over £33,000 was collected as a result of complaint visits.
The terms of agricultural wages orders are enforced by an
inspector of the Department of Agriculture following a com-
plaint by a worker alleging under-payment. During 1981, 12
complaints were made, of which 4 were substantiated resulting
in arrears of wages of £935.96 being paid (see Table 2).
While the wages council system does provide a degree of
protection there are many other low-paid workers in need of
protection, most notably those in hairdressing, retail distribu-
tion and much of the public sector. It has been established by
the Labour Relations Agency that one-third of the workforce
in Northern Ireland is subject to low pay.12 Clearly what is
needed in the future is adequate enforceable pay rates for all
low-paid workers, not just those who happen to work within
the scope of wages councils.
Effects of minimum wage legislation
The wages council legislation affords a degree of protection to
those workers covered but is of no consequence to the many
tens of thousands working in industries and occupations not
covered. The legislation cannot be said to have made a dra-
matic impact on the reduction let alone the elimination of
poverty as low pay remains a principal cause in Northern
Ireland.13
Table 2: Number of workers to whom arrears were paid during 1982
Workers to whom Amount of
Wages Council/Wages Board arrears pc
\id arrears paid
Baking 57 28,841.12
Boot and shoe 1 125.00
Catering 20 2,713.18
Clothing 1 10.53
Laundry
Linen and cotton handkerchief
Paper box
Road haulage 14 3,848.86
Sugar, confectionery and
food preserving
Agriculture (1981) 4 935.96
Total 97 36,474.65326 Administration, Vol. 31, No. 3 There remain low levels of unionisation in the poorly organ- ised and labour-intensive trades and this makes even more liable to the adverse consequences of the recession. The system has not coped well with the effects of inflation and the low levels of unionisation has further impeded progress in this area. There is little or no evidence available on the effects of legislation on employment, but some indication that there is higher labour turnover as a result of low wage rates. As a Northern Ireland Economic Council Report states: 'Another major cause of high turnover, especially amongst single female workers is the low level of earnings in the industry."4 There is growing debate about the future of the wages councils in the United Kingdom. The small firm lobby and some employers' associations have argued for their abolition claiming that wages councils are 'inflationary, intrusive and a source of inefficiency and unemployment'.15 While it would be true to say that British trade unions, especially in the late 1960s and early 1970s were also increasingly critical of wages councils because of their consequences for collective bargaining and tendency to institutionalise low pay, the experience of trade unions in those sectors where wages councils have been abolished has been that abolition has not led to an improve- ment in wage rates, with the result that there is now a greater consensus about the need for their retention and strengthening. This commitment is reinforced by the trade union movement's reaction to the Conservative government's apparent willing- ness to reduce state intervention in the employer-employee relationship generally and wage determination in particular.16 Conclusions Our brief survey of minimum wage legislation in Northern Ireland has underlined the inadequacy of statutory minimum levels of remuneration as established by wages councils when compared to realistic definitions of poverty such as the supple- mentary benefit scale rate for a married couple with two children plus 40 per cent. As a means of protecting the wage levels and interests of low-paid workers, wages councils are somewhat inadequate because they only cover a restricted number of industries and therefore not the majority of low- paid workers who are employed outside the wages council
Minimum Wage Legislation 327 sector. The wages inspectors are increasingly effective in iden- tifying instances of under-payment, together with other viola- tions of the legislation and are responsible for prosecuting defaulting employers. Extending protection for low-paid workers in Northern Ireland is especially difficult at the moment because of the general debate being conducted in Britain concerning the future status and functions of wages councils, so that there is little possibility of extending protec- tion to other major low-paid groups such as hairdressers, shop workers and clerical workers. Family Income Supplement does provide necessary and valuable assistance to low-paid workers with children, earning below the prescribed amount of £82.50 for a family with one child, plus £9 for each additional child. However, this form of income support is not available to either low-paid workers without dependent children or to low-paid families earning in excess of the prescribed amount. Further- more it is possible to argue, as was said of the Speenhamland system of poor-law relief in the eighteenth century that it was effectively a subsidy to low-paying employers, thereby rein- forcing a low-wage structure. Finally there is a need for further research to inform an on-going policy debate about the impact of minimum wage legislation on levels of unemployment, pro- ductivity and the general consequences of the introduction of a general minimum wage for all workers. Notes to article 1 Similar minimum-wage-fixing perception of poverty in bodies - J o i n t Labour Commit- Northern Ireland' 1982 (unpub- tees - have been established in lished paper) the Republic of Ireland under the 6 Evason, 'Family poverty in Industrial Relations Act, 1946. Northern Ireland' CPAG 1978. 2 Black, Ditch, Morrissey, Steele, Evason, 'Ends that won't meet' 'Low pay in Northern Ireland' CPAG 1980. Townsend, op. cit., Low Pay Unit 1980; Social Secu- chapter 1 rity Advisory Committee, First 7 Interviews with Northern Annual Report 1982 Ireland civil servants 3 P. Townsend, Poverty in the United 8 NI Hansard 1/11/45 Kingdom chapter 18, pp. 618-621. 9 Report of the Committee of Penguin 1979 Inquiry into the Catering Indus- 4 P. Townsend, op. cit., p. 623 try 1964 5 EEC 1977 The perception of poverty 10 See eg. NIC/ICTU Annual in Europe. Also, J. Ditch, 'The Report 1979, pp. 110-112; ICTU
328 Administration, Vol. 31, No. 3 Annual Report 1980,553 Council 'The clothing industry 11 Sir Roland Nugent, NI Senate in Northern Ireland', December Reports 29/11/45 1979, p.4 12 Labour Relations Agency, 'Low 15 Quoted in Low Pay Unit Who pay in Northern Ireland - the needs the wages councils? pamphlet role of the LRA' 1980 No. 24, May 1983 13 Evason, op. tit., 1978 16 For a vigorous survey of wages 14 Northern Ireland Economic councils, see Low Pay Unit ibid.
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