23 April 2015
Much has been made in this election campaign about the cost of living and wage growth, zero-hours contracts and the financial hardship still facing many.
While the Conservatives are hailing the long-awaited return to sustained wage growth, opposition parties are quick to point out that the main reason we are finally seeing wage growth is because of stalled inflation rather than a pick-up in pay.
And the FM sector - a labour-intensive industry where a large number of employees are paid towards the lower end of the UK's average pay scale - has come into focus with unions claiming that industries such as FM are more responsible than most for the drop in average wages by 8 per cent in real terms since the crisis.
Indeed, in March the Trades Unions Congress, in conjunction with the New Economics Foundation, published research claiming that the trend towards government outsourcing had acted as a deflationary force on wages, and that median wages in the private sector for equivalent jobs to public sector roles were significantly lower.
Residential care workers, for example, earn £9.45 an hour in the public sector against £7.23 in the private sector. And although outsourced jobs are often protected in the short term, there are often no stipulations that private sector companies need to offer the same pay when they take on replacement workers once they are running outsourced contracts.
On top of this, critics say private sector operators often also water down benefits such as pensions and holidays to make the margins on contracts sustainable.
But outsourcers will argue that they make use of more efficient systems and back-office functions rather than offering worse terms to employees. And, on top of this, outsourcers themselves are now moving to redress the balance in terms of wages, possibly in preparation for more formal moves by the government post-election, depending on the colour of the flag flying over Downing Street come 8 May. Labour leader Ed Miliband has made the cost of living crisis his major theme, repeatedly calling on companies to pay the 'Living Wage'.
And some are responding. OCS Group recently committed to paying the living wage to staff directly employed at its UK headquarters and also to offer a 'Living Wage bid' as part of its tendering proposals to prospective and current clients. The company says it is working with the Living Wage Foundation and other FM providers to raise working standards and pay rates for all FM employees, and with 26,000 employees in FM across the UK, it has significant clout. Other FM operators have made similar pledges, notably ISS and Incentive FM, but it is by no means industry standard as yet. And while margins remain slim and tendering competitive, it is a tough argument to win.
Any incoming government is going to find itself in a tough place too, were it to legislate in favour of a living wage for government contracts. This would instantly change the economics of many contracts, removing some suppliers from the reckoning or sending up government contract costs. Even if the Labour party were to win a majority, it is unlikely to be able to match rhetoric with action.
Graeme Davies writes for Investors Chronicle