Whilst the economy has been improving of late, times remain difficult for many.
Whilst the economy has been improving of late, times remain difficult for many. Household budgets remain constrained by static pay and rising costs, fuelling an ongoing debate around the cost of living.
We have recently seen a proposal from the Low Pay Commission to increase the minimum wage by 3% and in an industry like retail in which a high proportion of staff are on or near the minimum wage, this increase will have an impact.
But the debate has widened beyond the minimum wage; there is a growing campaign for employers to do “better” and pay the ‘Living Wage’ – a rate of pay independently calculated as being the threshold at which staff can afford a basic quality of life.
There are now approaching 600 accredited Living Wage organisations. Retailers however are almost entirely absent from the list, the only exceptions being cosmetics company Lush and SSE if you count them as a retailer as well as a utility.
KPMG research published at the time of last November’s Living Wage Week found that the biggest single group of workers earning less than the Living Wage is sales and retail assistants – who number over 800,000.
There is surely a good reason behind this. Retail is an industry with a high proportion of young and part-time workers. Therefore pay is low. It has to be, in order to make the business model economically viable. Retailers simply could not afford to pay their staff a Living Wage because it would represent a massive hike in costs.
Correct? So the retail industry can carry on paying the minimum wage and ignore any clamour to do more?
I am not sure that it is so simple. I accept that the bare stats do not take into account staff discounts which go towards total rewards. However, I believe that the sector will come under increasing pressure to move beyond the minimum wage, our largest retailers in particular, as well as retailers selling premium products.
Although the difference between the minimum wage (£6.31) and the Living Wage (£8.80 in London; £7.65 outside) is large, organisations that pay the Living Wage report that the extra cost is significantly or completely off-set by a reduction in staff turnover and absenteeism, meaning lower recruitment and sick pay costs. At KPMG for example, turnover amongst our cleaning staff has almost halved since we began paying the Living Wage in 2006.
Combine this with the improved motivation and therefore performance that an uplift in pay brings, and you can begin to see that paying the Living Wage really could have a proper business case behind it.
Is this enough, however, when it would affect over a quarter of a retailer’s staff base?
Evidently the industry feels not - otherwise more than one retailer would have acted.
But if one major retailer were to make the move that could prove a game changer for all. And with potentially huge brand and PR gains to be made, one couldn’t rule out it happening.
Whatever the case, with political and public attention on low pay set to continue, the industry needs at the very least to stay alive to the debate and be able to articulate its position effectively.
David McCorquodale is head of retail at KPMG