Help for 'slave wage' part-timers costs British taxpayers pounds 2.9bn

LOW pay is not just a misery for the millions who have to endure life without enough money. It is also a drain on the British taxpayer. Propping up poor wages with state benefits is costing every taxpayer a staggering pounds 100 a year, and the figure is rising.

Total annual expenditure on benefits paid to those in work was most recently estimated at nearly pounds 2.4bn, having gone up by more than 100 per cent in three years from 1990. The estimates for 1994 suggest that the bill has gone up to more than pounds 2.9bn.

One reason for the increase is that employers are getting rid of full- time workers and are dividing the jobs between a larger pool of part-time staff, who then have to subsidise their low pay with state benefits, such as family credit. Other part-timers, paid less than pounds 58 a week, do not qualify to join the National Insurance scheme - saving the employer from making a contribution. Although the practice is spreading to all forms of employment, this is particularly the case in retailing and catering.

Gateway Foodmarkets, which employs a staff of 25,000, embarked on an hour - and thereby pay - cutting exercise. In many cases, full-time staff working 39 hours a week had their hours reduced to as little as 16. Some were asked to work two shifts per day, doing away with paid tea breaks. The Burton Group reduced the hours of the majority of its full-time employees from 39 to 15. In both cases, staff were offered redundancy, but in the current state of the labour market, most "chose" to work part-time. In reality, there was no choice at all.

It is a problem that hits women hardest. Between 1980 and 1992, the number of women workers who did not pay National Insurance trebled. In all, three million people earn less than the lower earnings limit, which enables the employer to avoid his share of National Insurance and renders the worker ineligible for sick pay, maternity leave - and the state pension.

Mrs J, an employee in Dorset of a national supermarket chain, told a TUC survey of low pay that she works for 16 hours a week and takes home pounds 57. Her experience explodes the employers' myth that women "like" part- time work because it is more flexible.

"I would like to do more but they won't give me any more contract hours," she says. "Sometimes there are extra hours on bank holidays but I can't do them because I claim housing benefit. It's all profit at the supermarket. Most of the staff want to work full-time but they like part-timers as they're more flexible."

Flexible for whom? Doris, who has worked as a petrol station cashier with a company in Wiltshire for five years without a pay rise, is employed on a rota system for between 20 and 24 hours a week. But as the station is open 16 hours a day, 364 days a year, she can be called in to cover staff absenteeism at any time. Because she works part-time, she gets no meal breaks, no time off for working bank holidays, and no overtime. "Fairness and rights for part-time workers?" she asks. "It stinks."

In February 1993, British Home Stores made a third of its full-time workforce redundant, replacing them with employees on "flexible hours" contracts. Under this system, employees have no guaranteed or set hours, but must be prepared to work when and were they are needed. Such contracts are now in use in Woolworths, Allied Maples. Kwik Save, Aldi, Netto and B&Q.

The most extreme form of flexible working is the "zero-hours" contract, which requires an employee to be on constant standby, without any guarantee of work. There are no minimum or maximum hours, and therefore the "employee" has no idea of how much he or she will earn. There may be gaps of several days between shifts, but the employee cannot legally take up a second job because they are contractually obliged to be "available for work at all times".

Three years ago, the Burton Group introduced zero hours contracts, having first made 2,000 full-time staff redundant. The shopworkers' Union Usdaw says: "These forms of flexibility are never designed primarily to help people lead more integrated lives. In practice, the reverse happens."

The big retailers do not court publicity on this issue. Researchers can only work out the trends by comparing successive annual reports. Asda has reported employing more staff - yet its wage bill has gone down.

The incidence of low pay and the involuntary nature of part-time work - 800,000 people work part-time because they cannot get a full-time job - has prompted arguments that women are being indirectly discriminated against because they make up the vast majority of part-time Britain. The TUC is now actively pursuing with the Equal Opportunities Commission the possibility of taking legal action to force the Govern ment to amend the National Insurance scheme so that part-time workers become entitled to sick pay and maternity benefit.

Accompanying the growth of job-splitting is the increasing tendency for workers to have two part-time jobs to make ends meet. Two-job working has risen by 62 per cent over the last 10 years. Paul, from Hertfordshire, would like to work full-time but he is forced to juggle two part-time jobs. He is employed for 26 hours in a major supermarket, and then cleans offices for a further 11 hours a week.

For Paul, part-time work equals insecurity and lost social ambitions. "One day I'd like to raise a family but I couldn't do that until I have the security of knowing I can put food on the table and clothes on their backs."

The DSS estimates for benefits paid to those in work in 1994 suggest a total of pounds 2,931m, paid to nearly 600,000 claimants. The figures break down into pounds 1,480m in family credit; pounds 617m in income support; pounds 697m in housing support; and pounds 137m in council tax benefit.

This is the price the taxpayer pays for "Scrooge" employers. IanMcCartney, Opposition spokesman on employment affairs, argues: "The low pay strategy has a high price.

"Good employers who pay decent wages are forced to subsidise their low- paying competitors. An increasing number of responsible employers now understand that low pay is deeply uncompetitive. Labour recognises the important role of in-work benefits to top up wages for people with large families or high housing costs. But under the Tories, in-work benefits have become a subsidy for bad employers, topping up a bottomless pit of low wages."

Labour claims its plan for a national minimum wage will compel employers to pay a fair wage, and give value for money to the taxpayer as well as dignity to the employee. Academic research tends to support this view. Holly Sutherland, director of the Microsimulation Unit at Cambridge University's Department of Applied Economics, says: "In some situations, a minimum wage would lift a low-paid family off in-work benefits entirely."

But the Government refuses to go down that route, and is instead piloting a scheme that Ms Sutherland argues will perpetuate and extend low pay. Hitherto, benefits have gone to those with children. But the DSS has earmarked pounds 60m to spend on in-work benefits for workpeople who have no children over the next three years. This move, she points out, "has the potential to lower wages, with companies knowing that all their workforce, rather than a small minority, will be entitled to government subsidy.

"This would leave the low paid little or no better off, and the DSS and the taxpayer picking up an increasingly large bill as the gap between falling wages and an acceptable standard of living widens for a growing number of people."