Magazine article Marketing

Amanda Aldridge on Retail: Minimum Wage Hikes Are Threat to Service Levels

Magazine article Marketing

Amanda Aldridge on Retail: Minimum Wage Hikes Are Threat to Service Levels

Article excerpt

The concept of a minimum wage is an issue on which everyone tends to have a view. Most people have at some point had a job which positioned them at the lower end of the earnings pyramid. Some people graduate through those lower-paid ranks in their younger years; others spend their whole working lives there - but everyone has had their pay affected by the introduction of the National Minimum Wage (NMW).

If you were to trawl through the press, much of the comment you would unearth on this subject would come from unions, trade bodies, employees and, of course, the government. Having done precisely that, what struck me was the conspicuous silence of businesses themselves.

The latest increases in the NMW, effective from 1 October, saw a 7.8% increase in the pay levels for working adults and 7.9% for 18- to 21-year-olds, taking them to pounds 4.85 and pounds 4.10 an hour respectively. This comes on top of a rise of just over 7% the previous year. Yet UK businesses as a whole appear to keep their own counsel on the subject.

The retail sector is no different. Employment costs are one of the biggest expenses for retailers. Most generate very slim net profit margins and have to work hard to control costs. I challenge you to find any industry sector that employs the number of people in retail, but is not affected by salary rises equal to 35% since the introduction of the NMW in 1999.

A root cause of the rises is the fact that the initial NMW was set too low, prompting several years of wage increases above the national average. But what tends to be ignored is the knock-on effect these increases have on people earning above the NMW.

The retail sector has a high turnover of staff and, in a highly competitive marketplace, retailers are keen to attract and retain staff. Many therefore pay above the minimum wage - sometimes 5%, 10% or even 20% higher. As the NMW increases, so does the pressure on retailers to improve those salary levels.

Let us not forget that staff are a very important part of the retailer's brand. The service they offer, their product knowledge and presentability all contribute to the overall appeal of a brand in the public eye. The salary levels on offer are a crucial part of getting that staff mix correct. …

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