Close the Gap response to Living Wage (Scotland) Bill December 2012

Close the Gap response to the Living Wage (Scotland) Bill consultation 1. Introduction Close the Gap is a partnership project which works across Scotland on issues around women and the labour market. Partners include the Scottish Government, Scottish Enterprise, Scottish Trades Union Congress (STUC), Skills Development Scotland, and Equality and Human Rights Commission (EHRC). Close the Gap works with employers, economic development agencies, sectoral representative bodies, and employees. The breadth of partnership reflects the fact that equal pay is a productivity issue as well as an issue of equality, and that narrowing the gender pay gap would enhance the productivity of the Scottish economy. In order to meet the deadline, this response has not been seen by the Close the Gap steering group, and as such should be treated as confidential. This response does not represent the views of any one individual partner, but rather the experience of the project working across the private and public sector around womens labour market participation. 2. Response Q1: Do you support the general aims of the proposed Bill? Women workers are overrepresented in the lowest paid in Scotland, and will consequently be more likely to be beneficiaries of wage increases after the introduction of a Living Wage. Close the Gap works to address womens unequal pay across the labour market, and consequently, we support the general aims of the proposed Bill as it will narrow the gap between men and womens pay. Q3: What do you consider will be the advantages or disadvantages for employers and employees if public sector performance clauses stipulate the payment of the Living Wage? If public sector performance clauses stipulate the payment of the Living Wage, the advantages for both employers and employees are multitudinous. As has been evidenced by both private sector and public sector organisations which
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Close the Gap response to Living Wage (Scotland) Bill December 2012

have already introduced the Living Wage, it effects a positive impact on workers morale and motivation, and also lowers turnover and absence, reducing the costs associated with recruitment, retention and absenteeism. A Greater London Authority-commissioned independent study of the business benefits of implementing a Living Wage policy in London found that more than 80 per cent of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25 per cent. Two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70 per cent of employers felt that the Living Wage had increased consumer awareness of their organisations commitment to be an ethical employer. The research also found that 75 per cent of employees reported increases in work quality as a result of receiving the Living Wage. Furthermore, 50 per cent of employees felt that the Living Wage had made them more willing to implement changes in their working practices; enabled them to require fewer concessions to effect change; and made them more likely to adopt changes more quickly.1 Although introducing the Living Wage may slightly increase an employers wage bill, paying higher wages reduces turnover and absenteeism costs because employees feel more valued and are, therefore, more likely to stay with an organisation. Some employers find that the savings entirely offset the increase in wages. For example, KPMG found that introducing the Living Wage, along with other enhanced benefits such as holidays, sick pay and insurance has directly contributed to the achievement of key goals in some areas of the business. Turnover amongst cleaning staff has more than halved, morale amongst all teams has been raised, and productivity has improved, as attitudes have been more flexible and positive. KPMG also reviewed how it delivered services, and found that it could pay the Living Wage without incurring an increase in costs. This has specific relevance for women workers, who are concentrated in some of the lowest paid occupations, such as cleaning. Women are also more likely to work part-time than men, and most part-time work is in low-paid, low-status jobs, with high turnover rates. This gendered occupational segregation is a contributing factor to the gender pay gap, and consequently, womens poverty, and also child poverty. Q4: Which public sector bodies should use contract performance clauses to deliver the Living Wage?

GLA Economics (2009) An independent study of the business benefits of implementing a Living Wage policy in London London Economics

Close the Gap response to Living Wage (Scotland) Bill December 2012

We are not aware of any reasons for excluding any public sector bodies from a requirement to use contract performance clauses to deliver the Living Wage. Any calls for the exclusion of a particular type or group of public bodies should give rise to careful scrutiny of the equality impacts, including gender impacts, of such an exclusion. Q6: What information must be included in the Scottish Ministers report to the Scottish Parliament? We agree that any report to the Scottish Parliament must include, as a minimum, information on: The level of the Living Wage in Scotland, and the methodology for determining this figure; Low-pay mapping of Scotland (including type of industry; equality groups, including women; and work sectors i.e. private sector, occupational sectors) and analysis; Statistics showing the progress on payment of the Living Wage and analysis of progress made (in the public sector, private sector and third sector); Detail of any promotional activity undertaken to increase the number of employers paying the Living Wage, and the outcomes of this work; Detail of any other activity, as set out in the strategic plan, and whether this were delivered on time and achieved its objectives; Detail of any compliance activity undertaken by employers whose contractors and sub-contractors have not delivered against contract performance clauses; and Detail of forward planning for promotional activity, and other activity. It is crucial that all relevant information and data included within the report be gender-disaggregated to ensure that the impact on women is monitored and analysed. Q7: What is your assessment of the likely financial implications of the proposed Bill to you or your organisation? What (if any) other signification financial implications are likely to arise? There will be no financial implications of the proposed Bill to our organisation. All staff who work within the Close the Gap initiative are paid more than the Living Wage. Q8: Is the proposed Bill likely to have any substantial positive or negative implications for equality? If it is likely to have a substantial negative implication, how might this be minimised or avoided?

Close the Gap response to Living Wage (Scotland) Bill December 2012

The Bill is likely to have substantial positive impact on gender inequality. Women in Scotland are more likely to be in low-paid work than men. 22.6 per cent of women, compared with 14.6 per cent of men earned less than 7.20 per hour in 2011.2 Womens employment in Scotland Women working full-time currently earn 13.9 per cent less than men working fulltime while women working part-time earn 35.4 per cent less than men working full-time.3 Womens employment is concentrated in low-pay, low-status jobs such as cleaning, catering, caring, clerical and retail work. Women are more likely to have primary caring responsibilities, and due to a lack of quality, well-paid, flexible work, are often forced into part-time work. Women comprise the vast majority of part-time workers. In 2009 43 per cent of workers earning less than 7.00 per hour were in part-time jobs.4 Women comprise two-thirds of public sector workers, and consequently have borne a disproportionate burden of public sector spending cuts, through job losses, pay freezes, and a decrease in flexible working. There has been an increase in the number of people underemployed (those working part-time when they would prefer to work full-time) which has risen to 9.9 per cent of all Scottish workers.5 As women are more likely to work part-time, this means that there will be an increase in the number of people applying for part-time jobs, which in the past have predominantly been done by women. Women working part-time time now face competition from women and men who normally work full-time, for an increasingly smaller number of jobs. Arms length external organisations An increasing number of womens jobs are now with arms length external organisations (ALEOs). Most local authorities in Scotland have contracted out some of their frontline services to ALEOs. These often operate to deliver services in which female workers are concentrated, such as social care. The majority of the 32 local authorities operate ALEOs, with around 130 major ALEOs in total. Local authorities typically operate between one and four ALEOs, although three local authorities operate 14 or more.6 A Living Wage condition in public
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Scottish Parliament Local Government and Regeneration Committee (2012) Report on the Living Wage in Scotland
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Office for National Statistics (2012) Annual Survey of Hours and Earnings The Poverty Alliance (2010) Low Pay in Scotland Office for National Statistics (2012) Underemployed Workers in the UK Close the Gap (2012) Invisible Women: Employment data collection in local government

Close the Gap response to Living Wage (Scotland) Bill December 2012

procurement is likely to bring benefits to a significant number of female private sector workers. Pressure on household budgets Pressures on womens incomes through job losses and pay freezes are coupled with rising costs of living, which add to already straining family budgets. Childcare costs in Scotland are amongst the highest in Britain. The average cost of afterschool childcare at 48.55 per week is higher than England and Wales. On average, parents in Scotland can expect to spend 101.49 per week for 25 hours of nursery care for a child under two years old. The same amount of nursery care for a child aged two or over costs an average of 94.52 per week.7 Women experiencing in-work poverty often work in multiple low-paid jobs, with little time to spend with their families, and frequently have to do without fundamentals such as heating and healthy food. Child poverty Low pay is an important cause of womens poverty. From pregnancy onwards, women face immediate financial penalties, thousands lose their jobs and many more face discrimination and reduced opportunities in the workplace. Poverty wages for women affect the whole family. Child poverty is inextricably linked to the poverty of their mothers. Four out of ten children living in poverty are in single mother households, and a further three out of ten children have a mother on low or no income. Around 25,000 children in Scotland are in severe poverty and in households where at least one adult works.8 61 per cent of children in severe poverty live in a lone parent household. There are 60,000 children in lone parent families, 22 per cent of all children in lone parent families, were in severe poverty, compared with 5 per cent of children in couple households. The impact of the Living Wage on women workers Increasing the pay of Scotlands lowest paid workers will undoubtedly have an impact on women workers in Scotland. Research has shown that implementing the Living Wage would increase the net income of a single parent with one child by 5 per cent (the majority of whom are women), while a couple with one child would see their income increase by 11 per cent.9
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Children in Scotland and The Daycare Trust (2012) The Scottish Childcare Lottery Save the Children (2011) Severe Child Poverty in Scotland Scottish Government (2010) Low pay and income inequality in Scotland

Close the Gap response to Living Wage (Scotland) Bill December 2012

Where the Living Wage has been introduced in Scotland, it has tended to have the most impact on women workers and part-time workers, the vast majority of whom are women. For example, in Scottish Borders Council and East Renfrewshire Council, 85 per cent and 76 per cent of beneficiaries respectively were women. In the Scottish Government and associated agencies, 71 per cent of beneficiaries were women.10 Increasing the pay of low-paid women workers would have a positive effect on womens poverty, and child poverty. The impact will not only be felt on household budgets, but also by local economies, because of womens marginal propensity to consume. Money in womens pockets tends to be spent on food, clothing children, and on goods and services for the family. This spending benefits local businesses, thereby driving economic growth in local economies.

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Scottish Parliament Local Government and Regeneration Committee (2012) Report on the Living Wage in Scotland