Farewell to the workers' friend: Barrie Clement mourns the untimely passing of Britain's wages councils

WINSTON CHURCHILL would have counselled against it. The labour movement is implacably opposed to it, and employers are, at best, lukewarm about the idea.

Nevertheless, next Monday, the Government will abolish the last wages councils, which set minimum rates for 2.4 million workers - 80 per cent of them women, including many from ethnic minorities. The areas they cover include the hotel and catering trade, hairdressing, shopworkers and other jobs for which pay is traditionally low.

In fact, it was Churchill, as president of the Board of Trade, who introduced the forerunners of the wages councils in 1909. In April of that year he told the House of Commons: 'It is a serious national evil that any class of His Majesty's subjects should receive less than a living wage in return for their utmost exertions. It was formerly supposed that the workings of supply and demand would naturally regulate or eliminate that evil . . . But where you have . . . no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad employer is undercut by the worst . . . where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration.'

More than 80 years later there seems to be a consensus outside government circles that Mr Churchill may have had a point.

Part II of the 1986 Wages Act, which underpins the wages councils, is one of the most important pieces of equal opportunities legislation we have. The system can help women in wages council sectors to keep pace with men doing similar jobs elsewhere. The gap between male and female workers within the council sectors is also less. Women working in full-time manual jobs in council industries earn 81.3 per cent of the gross hourly earnings of men - 10 percentage points more than women in all industries.

The TUC this week lodged an official complaint to Brussels over the abolition of the councils, and an increasingly exasperated Equal Opportunities Commission will next month call for a ruling on the whole issue of equal pay from the EC because it considers the Government is in breach of European legislation.

Successive right-wing ministers harbour a distaste for the system because they believe it interferes with the labour market. Michael Howard was no friend of statutory minimum wages when he was Employment Secretary and the Thatcherite Michael Forsyth, now an employment minister, was particularly anxious that the Trade Union Reform and Employment Rights Act 1993 should contain a clause scrapping the arrangement.

Over the past eight years, their scope has been reduced, and since 1979 the wages inspectorate has shrunk from 177 civil servants to about 40 for an estimated 400,000 workplaces.

The system has been widely abused. Official figures suggest that in 1991 almost half of all part-timers and a quarter of full- timers within the scope of the pubs and clubs wages council were paid below the minimum hourly rate. About one in five shopworkers was paid illegally low wages.

The last vestiges of protection come to an end next week when the remaining 26 councils are officially wound up and some of the lowest paid workers in the country - most of whom are not union members - become responsible for negotiating their own minimum rates.

Pay rates set by wages councils were minimal. In some cases, it could be argued, the councils may even have been successful in holding earnings down.

About 95 per cent of workers covered by the councils are in hotel and catering, the retail trade, clothing and hairdressing, where the basic minimum rates have been set between pounds 2.66 and pounds 3.30 an hour, or pounds 106.40 to pounds 132 for a 40-hour week. In fact, about two-thirds of the workers are employed part-time, many attempting to reconcile family and work responsibilities.

The Low Pay Unit believes that many of the smaller employers may have jumped the gun and already reduced pay 'with the agreement' of their workers. Clearly some employers are anxious to take advantage of the legislation to keep pay down. One young hairdresser in the Midlands, who wants to remain anonymous for fear of dismissal, asked her employer recently to pay her the minimum rate of pounds 2.88 an hour when she qualified as a 21-year-old on 4 September. In the mid- Eighties the Government removed wage protection from workers under that age.

Her employer informed her that from 30 August there was no such entitlement and that she would continue to be paid pounds 2 an hour - pounds 80 for a 40-hour week.

In a statement published yesterday, the Employment Department defended the abolition of the councils, describing them as an 'anachronism'. It said: 'The system imposes a burden of bureaucracy on employers, distorts the labour market and destroys jobs.' Wages were best decided in the labour market between employers and their workers in the light of local circumstances. There was no good evidence that abolition would lead to a general reduction in pay.

However, there appears to be a contradiction between the Government's contention that the system destroys jobs - by implication, people are pricing themselves out of employment - and the assertion that abolition is unlikely to lead to cuts in wages.

Elementary micro-economics has it that for a market to operate efficiently there must be a semblance of parity between the buyer and seller. In this case, though, the seller - the worker - has a limited opportunity to choose an employer, given the limits on his or her knowledge and mobility. Under most circumstances employers will be able to adopt a 'take it or leave it' attitude, since there is likely to be an excess of unskilled workers in future.

Employers, moreover, have the possibility to collude to keep wages down, while non-unionised workers have little chance to 'collude' to force them up. If employers decide to compete, it will be to cut wages. This, in turn, will mean fewer training opportunities.

On the macro-economic front, little advantage seems to accrue to anyone from reducing the purchasing power of more than two million workers in a country struggling to emerge from recession.

If the Government winds up the agricultural wages board - and it is now holding consultations on the issue - Britain will become the only EC country without minimum wage protection of any kind. In a move that paved the way for the abolition of wages councils, we 'deratified' International Labour Organisation Convention 26 in 1985, the only country among 99 signatories to do so. The convention required countries to provide some form of wage protection for the low-paid.

Many employers have shown little enthusiasm for the decision and there have been signs of public disquiet. An opinion poll commissioned by the TUC found that 90 per cent of the electorate supported the system. Members of the CBI have voted three to one against the Government's strategy, and only one member of an all-party Commons select committee came out in favour of outright abolition.

One might be forgiven for arguing that the two million workers concerned do not matter to the Government. After all, most are women, many are black, an appreciable proportion do not vote, and even if they did, they would be unlikely to vote for the Conservatives.

This, however, is hardly an excuse for abandoning a system that has worked well since its introduction, helped to protect the interests of low-paid workers with little clout in the workplace, and done minimal damage to Britain's labour market.

(Photograph omitted)