 Lady, good morning, and welcome to this, the 22nd meeting in 2015 of the Economy, Energy and Tourism Committee. I welcome members and our witness, anyone in the gallery. I remind everyone please to turn off or at least turn to silent any mobile phones or other electronic devices. We are short on three members. One of them, at least, I know, is on his I will share with you the other two to help us to share them with us shortly. Item 1 on agenda, can I ask committee members are happy to take item 4 in private? And to consider further draft reports on our security of supply inquiry in private at future meetings. It is agreed. Thank you. Item 2 on agenda, we are continuing our evidence sessions on our inquiry into work, wages and wellbeing. I would like to welcome this morning Neil Carberry, who is director for employment and skills at the CBI. Welcome to you, Mr Carberry. Thank you for coming along. Now, I know you need to be away sharp at 10 o'clock, so we will of course respect that. I know members have a range of questions that they're interested in asking around issues like flexibility of the labour market, issues around the fair work convention, the Scottish Government has established, the business pledge that's been created, issues around the living wage, the national living wage, zero-hours contracts and issues around training. So, I hope we can cover that ground in the time that's available. I wonder if I could just start off by picking up a point from the submission that you've put in on behalf of CBI Scotland, where you talk about the importance to employers of having a flexible labour market, and you say that you believe that that's critical to future growth. I was wondering if you could elaborate a little bit more on what you mean by a flexible labour market, what do you see as being the characteristics of that, why is that important and what are any challenges to the labour market being flexible. Thank you, convener. Good morning, everyone. For the record, before I start, I should say that I'm a member of ACAS Council and of the Low Pay Commission. Both of these are public appointments, but any comments I make this morning will be purely representing the views of the CBI and CBI Scotland in particular. Well, I think we make an important statement in the opening part of our evidence to you, which is our strong belief that the point of economic growth is to raise the living standards of the population of the country. And that economic growth and that goal are not in conflict. In fact, the two are mutually reinforcing. The reason we focus particularly on flexibility is what is important is ensuring that companies in Scotland have the ability to compete, have the ability to grow, have the ability to create the kind of work that the committee is focusing on. Within the regulatory framework, there are elements of that which need to maintain an incentive for companies to be able to create jobs. So one of the risks that exist if one were to move to diminish the UK and Scotland's relatively flexible labour market is, for instance, on the issue of zero hours contracts, do we risk making the best, the enemy of the good by making it less likely for companies to take staff on in different circumstances? But I wouldn't want to define labour market flexibility only in regulatory terms. There is a lot about how companies use skills and how companies and public authorities work together to develop skills. Clearly, there's been a big focus on productivity and economic debate both in Scotland and in the wider United Kingdom over the last year and a half. It's a critical goal of the CBI to support action to improve productivity. I'm working currently with the Mayfield review that the UK says has set up to look at things like improving productivity and manufacturing through improving manufacturing skills and skills for leadership in particular. Those things also fit into our definition of a flexible workforce, a workforce where people are, to borrow the academic term, polyvalent. They can do different things, they can therefore be more productive and that commands the ability for the business to do more, to produce more and of course the business to pay people more, which is, as I started this answer, an important part of the equation. Thank you. So you see this very much as a partnership approach between employers and employees. Just to follow up this line of questioning then on a flexible labour market. Are there, how would you characterise the UK or the Scottish approach to these issues as opposed to what we might see in other countries and are we better or worse? Are there other countries you think we could learn from in terms of flexibility? So, if you look at the experience on pay and on employment creation in Scotland and in the wider UK by comparison with, for instance, other European Union nations, over the long term there tends to be more real wage growth here and there tends to be more employment creation here. So I think the broad status of the labour market around the ability of businesses to operate and create jobs is actually in a reasonably good place. I think where we have more challenges and I know it's a focus of the committee's work is making sure that within workplaces we are capturing the best of management, job design, skills, investment and training to make the best of that. While I'm fond of saying that we don't need to copy the German vocational education system, we need a Scottish system that works effectively, it is clearly the case that there are jurisdictions in Europe that are doing some of that development and progression stuff better than we are. The CBI published a major report at the annual conference of the UK organisation last November called a better off Britain, which focused very clearly on the need for companies to start treating their people planning as importantly as they treat their financial planning. Thank you. I think that Johann Lamont is quite keen to come in with some questions on the same theme. I'm going to hear what you say about flexibility. I wonder if you believe, and you make great play of this in your own presentation, that flexibility was a response to the recession? Do you still think it's a response if we're moving out of recession? I think there was a high level of flexibility in the British labour market before the recession. If you go back a decade, there were certainly tens of thousands, if not 100,000 tents in Scotland, for instance, well before the recession, and there is an element of that flexible part of the labour force that's bringing people in to work maybe from being unemployed, but also helping people choose different forms of work and fundamentally helping businesses to meet demand peaks where otherwise they would use longer working hours or other coping mechanisms. I think that was always there before the recession. It's certainly the case that through the recession it grew and I think there's probably two phases to this. The first phase is the labour market reacted better than most of our competitor nations labour markets in as much as unemployment did not rise very high. There was, roughly speaking, an unspoken deal between employees and their representatives and companies that things were pretty tough and that it might be best to trade off a bit of pay growth for maintaining employment rates. That's largely what happened in the labour market as a whole. I think that will reverse and is reversing if you look at things like the involuntary part of time because they are now going down. Having said that, many, many sectors are in a fundamentally changed market which is deeply competitive. I know many of you were in Paisley last week to talking to some businesses who are competing internationally. Certainly when I was here with my low pay commission hat on meeting businesses just before the summer recess talking about the national living wage, the capacity for businesses to invest large sums of money in the way that maybe they could have before the recession is not as great. That puts pressure on good employee relations and important that companies are thinking about that. It puts some pressure on realistic expectations on the other side of the table but the one thing that will help is companies being really clear and really honest. If you look at the zero hours issue for instance, we are very clear as an organisation that the challenge is not the existence of flexible contracts like zero hours. The challenge is where people have been misled to the terms of their engagement with an employer, where people are treated badly within that framework. The general view in the business community in Scotland on that has been, let's go after the bad practice and see what we can do about it but let's not damage the principle of being able to offer flexible contracts. After all, the ONS suggests that two thirds of people on zero hours contracts get all the hours that they want every week. They don't know from one week to another necessarily that they are going to get those hours, which might create an impact. I notice from your presentation too that CBI makes a big issue of skills and I presume in work training as well. Do you think that there is a contradiction between having this highly flexible jobs market where you are not really guaranteed anything but at least you shouldn't work and an expectation that people should be skilled in progressing on skills? Or do you see that as a contradiction or how do you think companies should manage that? I think if you get it right it's not a contradiction and certainly companies invest a great deal of money in skills at the moment. It's probably fair to say that not all of that is as effectively spent as it might be. I think there's a real challenge in moving away from the idea that you can buy rather than make and I think particularly in areas like manufacturing you're beginning to see a realisation that a lot of the focus on having lots and lots of degree educated university graduates and we do need lots of degree educated university graduates. That alone is not enough. If you go into one of our members they'll say yes we need graduates but actually we need ten skilled technicians for every graduate we need and that's where we're having a real issue. The CBI's messages for the new regional colleges I think there's a real sense of wanting to build a partnership to help young people head for those technical skills that are really in demand and making sure that for instance programmes like MAs are focused on those and there is absolutely a message for business there which is that businesses will have to step up to their part of that. There's evidence we've got in terms of the impact in the economy that it's benefits if people have security and also I've got progression. I don't know if these are in contradiction with the arrivals contracts or not but in your own report you say flexible working practice is a driver of employee engagement and through this a business in Scotland see a direct link between high levels of employee engagement and improvements in productivity and performance. So there's a connection between employee engagement and improvements in performance. How can you have that increased employee engagement if people are basically in terms of their work very insecure? I think the most important thing is less the contracts are working on than you are giving people what they expect and what they want from the workplace. So some of the highest employee engagement scores in the CBI's membership are held by some companies who use quite significant flexible contract models but they're very upfront about it. They do seven days notice on shifts, they're very clear about if you're a young person working for them and you're doing your exams at university you cannot work for them for a month or two months if you want to do that. A lot of this comes down to less the regulation that might be passed in parliaments so much as how people are treated on the ground in the workplace and building positive relations there and the real challenge for businesses in that is making sure that we're investing in a line management skills to do that. And the last point IPPR make the point that if there's a workforce there who are not guaranteed work that businesses taking them on rather than investing in training and skills actually end up not increasing productivity but keeping wages low. So you have an economy that's based on using a larger pool of workforce with no guarantees rather than having a trained workforce with some expectations of its employer and do you accept that is potentially what's happening and do you think that's good for the economy? I think the dichotomy of there's good work and there's bad work is quite a difficult thing to give some legitimacy to in the labour market. My sense is that the most important thing is that people have genuine roots to progression and that if people are coming in low skilled jobs that are attracting low pay that one of two things is happening. Either the company is thinking about how it changes its business model and this is where many of the retailers are at the moment which is largely a question of how do you manage to pay people more while maintaining the customer service levels that people are looking for in the stores. Because they are labour intensive businesses and particularly small and medium sized retailers who are the ones who are particularly affected and tend to be the ones who pay close to the existing national minimum wage. So it's a question primarily of progression about companies being able to demonstrate that they're thinking about those things. I think it's never been sustainable for a nation like Scotland to compete on low wage labour. Are you aware that there's some evidence that we've certainly had which suggests that in terms of people's health then some working perhaps they're better to be unemployed than to be in these jobs. And would you, would CBI take a view in terms of that, if that were the case, that uncertainty and security is actually affecting people's health and they for presumably the economy, is that something that you would find acceptable? So broadly the evidence suggests that it's usually better to be in work than not in work. Specific situations which are negative for individuals I wouldn't be surprised that you'd heard that. It puts a premium on the way companies think about their workplaces and how they manage them. Certainly employee health's been a big focus for us over the last 18 months or so. We've published a CBI good practice report to help our members with thinking about that. Clearly job design is a big part of it and one of the issues for us is making sure we have a debate about flexibility that's focused on giving staff what they're looking for. Because often those stressors and those unhealthy situations come where the demands of the workplace and the demands of what people have to do outside the workplace are completely in conflict. I think businesses thinking intelligently about that and about how they invest for the health of their workplace is really important. We're proud in the UK as a whole and in Scotland as well in particular in our record on health and safety and one of the best health and safety records in the world. Having said that if we're honest the safety bit of that has always been much louder than the health and there is a sea change in the business community now thinking about the impacts of workplaces on employee health. I think that that will come with time but certainly there's genuine interest in business about what more we can do. A couple of other members want to come in with follow-ups before we move on. I'll start with Joan McCartney. When you talked about businesses responding to the recession in terms of the way that they deal with their employees, when we had the round table earlier this week in Paisley which was anonymised so I'll keep it anonymous, I spoke to an individual who was unemployed and who had been employed by a large international company. I would expect to be a member of your organisation although I don't know for sure. Anyway what this gentleman talked about was that company's response to the recession was downsizing and he said that having had a career with this company where he was satisfied and happy in his work, the company's response to the international recession actually made his working life extremely difficult because it set worker against worker. He described as the whole atmosphere and the company changed as there was who's going to be made redundant next and certain people did certain things to keep their jobs and he said the whole atmosphere became poisonous and that's in a large company that you would expect. I would have said had a good reputation in terms of its brand. I just wondered how you respond to that. Some of the organisations have talked about modern management techniques affecting the quality of jobs and that seems to be a good example of that. The top line of that response is that there come times when you have to take costs out of businesses for the business to survive. Indeed, but at points you need to think about do we have the right set of people here for the business to continue to survive, continue to be commercial successful and therefore continue to employ as many people as we can. In a sense, I think there's quite a lot of good evidence in the academic literature about the difference between the distribution and the procedure, i.e. what people get out of a process. They often understand companies have to do things to survive, they have to be competitive. Having said that, you can run things like redundancies in different ways. It comes back to the comment that I made earlier about making sure that effective people management and how you treat your people is a board-level issue and important and behaviours are modelled by the senior team in businesses. Critically, you can do rounds of redundancies in ways—they're always difficult because they're difficult things that companies have to deal with—but you can do them in better ways and less good ways. One of the issues is making sure that the approach to those things is clearly set out. For instance, if people are engaged in behaviours that are destructive to colleagues in those processes, they are not rewarded for those in the redundancy process. A lot of this comes down to the individual company and how they manage the process. Can I go on? I wanted to ask the trade union. I will correct them if other members want to follow up. I'll come back to you later on. Patrick Harman. Thank you. You made some specific comments about zero-hours contracts, which put me in mind of words from Mr Cridland during the UK general election. He was defending the existence of zero-hours contracts, but he said, of course actions should be taken to tackle abuses. What abuses exist and what action does the CBI call for to eradicate those abuses? One of the critical issues is that the action is proportionate and appropriate. Having said that, pretty clearly, situations where people turn up at the workplace expecting work and don't get it, or are texted the night before a shift starts, those are things where unless there is some clarity and those are additional hours, those are things that we would have some concerns about and we don't think reflect good business practice. Now, there are situations where short notice shifts are important. We have a member that makes ice cream, like a lot of food manufacturing businesses. I'm aware of the pressure of time and I'm asking a specific question. You've mentioned two examples of abuses, short notice and the very disrespectful attitude of just using text messages to say somebody's not wanted or not needed. Are there other abuses and then could you tell us what action you're calling for to eradicate those abuses? Another example would be our support for the removal of exclusivity causes. I think clearly the employment that had already been announced the previous year before Mr Cudlidge's comments. Yes, and we supported that. We are happy to look at evidence from trade union colleagues and others on things that are not good practice and we've demonstrated already that we will support things that feel proportionate. It's really important to remember that if employers can create full-time or steady part-time employed jobs, they will tend to because they like to keep hold of people. They tend to use flexible contracts where that is a necessity but that means the deal changes for the employer too. You've mentioned these two examples. You've not given other examples. I suspect a lot of people working in zero hours contracts would be able to add to the list, but what action should government take to eradicate those two abuses? I think we are happy to look at issues around notice and whether there should be a notice period and how you would do that. Coming back to my ice cream example, there are sectors where you are able to give people only 24 hours notice of work being available or not. I think the thing to think about in those sectors is what is reasonable and what is the legitimate expectation of employees. It's not right for employers to expect total loyalty in the way that you might with someone who has worked for you for a long time. So you are suggesting a legally enforceable minimum notice period? I think that you would need some kind—I'm very happy to look at minimum notice periods. I think that the challenge is the demands of different sectors taking my ice cream example into account. I think that the challenge is people's lived experience who are doing that work, but thank you for the suggestion. I notice in your submission that you say that it is not, however, advisable for politicians to determine job quality or to attempt a definition. I'll take off my politicians hat and put on my business hat. Having run eight companies in Europe, 550 people, 14 manufacturing company turn-rounds in Scotland, and I ran other manufacturing companies in Scotland before I went down south. Let's talk on that basis. I find your assertions absolutely implausible. You've talked about the labour market and we're talking about flexibility. The best kind of flexibility is cross-training people in permanent jobs and getting maximum productivity. Why is the capital market done? Why is capital investment so poor in Scotland? Is it because it's easy to pay people on zero-hour contracts or less than the applicable minimum wage and to employ them on that basis rather than invest in capital? Because the cost of depreciation and financial costs are much greater than what you're getting away with in terms of how you pay labour. I'm not sure entirely by the labour substitution argument. I think one of the important things, and it comes back to the discussion Mr Harvey and I were just having, is there are substantial differences between sectors in labour and capital demand. I entirely agree that cross-training staff on permanent contracts for multiple different functions is an essential part of any work. Why are you putting so much emphasis on flexible work being sourced to better productivity and job protection? That's not the case. It's a question of different parts of the labour market. It will always be the case. I've been working in labour markets for 20 years now and the mass casualisation of the Scottish labour market is always just around the corner if you listen to the trade unions. It doesn't seem to be the case. If you look at the position, employers favour creating permanent jobs because you can do that investment. You can look at skills. There will always be a portion of the labour market which needs to be flexible to allow companies to try things, to try new things, to respond to demand, and there is a mirroring demand of that bearing in the point about people's lived experience on zero hours. Most people on zero hours contracts report that they are perfectly happy with their arrangement. I know that there are abuses, but we should remember that many, many workers experience of the flexible labour market is a positive one because flexibility should be a win-win. It should be delivering the kind of things that people need if they can only work for 15 hours a week, only work for 20 hours a week, but it should also be providing that arbitrage to do a bit more to create jobs where the permanent stuff isn't... You know that's not the condition. If that were the case, the productivity in using that we utilise people to try out things, but yet in your report again you're saying a balance of 50% of businesses plan to increase the size of their workforce and a balance of only 28% plan to increase recruitment to permanent posts. So we're saying 22% is going to be in this flexible, temporary area that you're talking about. The issue is, if you force businesses an opportunity to maximise their profitability and retain their cash, and again your assertion that the capacity to use available money is difficult just now, that's not true. The money has never been cheaper in the commercial market to now. So the whole landscape currently of using flexible labour and zero-hour contracts is not in the benefit of the employees, is it? Well that's not what employees tell surveys. Let's be clear. The majority of employees who are using zero-hour contracts say that they are happy with their arrangement, and I am sure that they want to move on and they want to progress, but the way to do that is by being in the workplace, not being out of the workplace. On the specific question of business investment, this is a recovery story. Five, six, seven years ago cash was king, you kept it in your business because you didn't know where we were going, and there was a big move to hold on to cash. We're moving beyond that now. Business investment is picking up. It's really, really important and that happens. It's a critical part of addressing the productivity issue. I'm very clear that one of the reasons why we might expect unemployment to drop a little slower if it continues to drop over the current or overcoming months is because there will be additional capacity created by business investment. But you said there wasn't capacity to use available money in the marketplace. Which is it? There isn't money to invest or there isn't money to invest? Which one? That depends on which sector you're in. No more questions. Thanks very much. I was interested in your submission around flexibility in the labour market at the time of the 2008 recession and also in what you said in your initial answer to the convener. I think the phrase you used was, in relation to what happened when companies came under pressure in 2008-9, there was an unspoken agreement trading off some pay growth against jobs retention and that that was something that had made a significant difference both to companies and to employees in the short term. Do you have a sense or can you give us an estimate of how widespread that unspoken agreement, if you like, that trade off was within the Scottish economy in that period? Was it something you would regard as typical of what happened in your member companies or was it exceptional and confined to the large engineering and other manufacturing businesses? I think it was fairly typical. I think it extended into medium-sized businesses and clearly the trade unions played an important role in the larger businesses where they're present. I think it's probably fair to say that in Scotland there was a bit more of it and purely a sense of what I was hearing and seeing at the time in member companies which largely reflects the fact that there has always been a slightly greater focus on employee relations. I would be aware that in the current year there's been a very significant downturn both in the oil and gas sector and across the supply chain including again very many engineering companies across Scotland. Do you have any sense that that pattern is being repeated or is it more typically the case that employers are simply reducing headcount in order to reduce cost? I was discussing this yesterday morning with a couple of major employers in Aberdeen and I think there are clearly ongoing discussions in all of those businesses with the workforce and those are difficult discussions. It involves challenging the company making proposals to change the way work is organised, to change different aspects of the workplace in the interests of maintaining both the competitiveness of the organisation and headcount in what is a very tough time but it's certainly the case that those discussions are taking place. Indeed, would it be unfair to say that if there were benefits learned in the 2008 recession or lessons learned about the benefits of keeping people in employment in order to see through difficult times those lessons are not being applied by very many of the employers in the oil and gas sector today? So that wasn't the impression that I took from the conversations I had yesterday morning. Clearly different organisations have different approaches and I can't speak for each of them but the general sense I was taking from colleagues was that they were looking to change things internally to maintain headcount rather than make large scale downsizing decisions. Albeit that we, coming back to the answer I gave earlier, the scale of the downturn is very significant and ultimately companies' hands are forced on these issues. The scale I guess in relation to parts of the economy is as great as it was six years ago and the impact is potentially as great as well. In terms of again the experience of six years or seven years ago you've described some of the benefits which are clear in terms of job retention. In terms of other measurables like sickness, absence, staff turnover areas like that, have you or are you aware of work that has been done to measure whether there were significant downsides in terms of both employee satisfaction and employee retention in the medium term from those changes? What was interesting about six years ago on sickness, absence was that the figures didn't change very much and the trouble with statistics is you can use them to argue both sides of the argument so that might be that employee engagement was handled well and therefore people didn't feel stressed and didn't go off sick. Alternatively it might be that people feared for their jobs and stopped taking time off. It's actually very difficult to conclusively prove one or the other but the trend in sickness, absence six years ago was largely flat. Given reduced hours of work in many workplaces is there a measurable impact on productivity from that shorter time working that was widely practised at that time? There can be, one always has to measure that off against the question of work intensification. We have to be very clear as a business community that if someone's working four days a week that means they're working four days a week, they're not doing five days, working four days. That brings challenges, again coming down to management skills and understanding of that. There are real challenges about managing flexible workforce, leaving aside the question of zero hours contracts and flexibility that business looks for, the flexibility that employees are looking for. It's a very different management culture than one where you could expect everyone to be in the workplace between two hours every day of the working week. That whole issue of management skills and handling this effectively is playing out very clearly in those sectors right now. Finally, you mentioned one or two of the abuses or the negative aspects of zero hours contracts in answer to earlier questions. You also mentioned earlier on a sign of change for the better, I guess, that involuntary part-time work was now going down at least in most of the economy. Is that something that you think should be left to the market to sort out or do you think that government should say that the time for involuntary part-time work is passed and that employers should restore full-time employment to those people who were previously in full-time employment in those jobs? Businesses know whether they can afford to employ people full-time. It's certainly the case that government should pull out of the system things that discourage people from working full-time. Certainly, we have a lot of members who found the old 16-hour rule a real issue. But I don't think that any government can effectively legislate for every business in a jurisdiction making a decision about whether something is a part-time or a full-time job. I think that has to be left to businesses. To be honest, we are seeing some real progress now, both on that and, of course, in private sector pay, which has recovered quite significantly over the last six months. It takes us into a different issue, but I wonder the point that you make about the 16-hour rule is something that we've considered from employees' angles in our previous evidence sessions. Have you done any work on that 16-hour issue from an employer point of view, and is there anything you could offer the committee by way of evidence about that? At the CBI, we're fond of getting into contentious arguments, but welfare is probably one too far even for us most of the time. But we have done some work with members, and there is clearly some feedback towards the lower end of the pay scale where people will turn down promotions, turn down more hours because of the effect on the benefits they get. Encouraging people on those first progression paths, which, even where companies have done the work to set out very clear progression paths, can occasionally be difficult because of those things. Those are certainly things that we'd be keen to see addressed. I want to talk about living ways before I do, so just a point that you mentioned to Mr McDonnell. We're talking about the oil and gas industry. We're understanding that we're still trying to be as positive as we can, and if we look at the regional college in Aberdeen and the universities, we're trying to ensure that there's a positive message that there's still a future where we can be positive. We're trying to ensure that we still have the skilled workforce to ensure that we maximise the productivity for the next perhaps 40 years. That balance needs to be maintained. Do you agree that we need to ensure that there's still a positive message going on there for young people coming forward? Absolutely, and look, the sector that we're talking about here is large-scale engineering. There are very few sectors that Scotland and the wider UK needs more. I think that it's very important that we continue to be positive about the potential, the kind of skills that colleges and universities are developing for the North Sea are going to be relevant in the North Sea but going to be relevant more widely. Certainly, there's been a lot of progress coming out of what happened six years ago on companies co-operating on skill retention in these situations. There's quite a lot to learn for the current situation in the North Sea from what, for instance, automotives were able to do six years ago, and we strongly support that. Thank you for that. Earlier this year, the CBI participated in the Living Wage Summit held by the First Minister. Obviously, we welcome quite a number of your members who have signed up to the living wage. What discussions is the CBI having with its members to look at moving forward to progress more members to becoming accredited living wage employers and to sign up to the Scottish business pledge? Let's define terms first. I'll call the Chancellor's Initiative, the NLW, and the Living Wage Foundation's Living Wage, the Living Wage, just to be clear. We've always taken the view that having a voluntary standard that is clear about what the income required for people to have a certain level of quality of life set by the Living Wage Foundation is a good thing. Equally, lots and lots of businesses have been able to step up to that. The truth of the matter is, there are lots and lots of businesses who simply can't or who will take a long time to be able to get there. With that in mind, the Living Wage Foundation themselves say this could never be a statutory requirement. Within that framework then, you have a lot of businesses in a few key sectors, food manufacturing, hospitality in particular, smaller and medium-sized retailers and small business generally. One of the things that I understand as a low-paid commissioner that doesn't often get a lot of play in the political debate is that the national minimum wage is largely a small business issue. It is a much more effective policy among small businesses in terms of the impact it has than on larger businesses. Case in point on retail, most of the supermarkets starting rates are well above £7 already. Smaller and medium retailers are more towards £6.50. You are giving me an explanation. My question is, what discussions are you having with your members to encourage them to become accredited living wage employers and to sign up to the business pledge? That is the question. What discussions are you having? You are giving me an explanation of the situation for business, but you are not actually answering the question in terms of what discussions are you having. I was coming to the answer because it is important that I reflect the fact that we are a membership organisation. CBI policy is not made by myself or Hugh Aitken or John Cridland. It is made by our members and the sexual differences on this are very difficult. We have done work. We welcomed the Archbishop of York, who is a great campaigner on these issues, to our national conference last year. We have been very clear that this is a discussion that businesses should be having about where their entry level of pay is. We are equally clear that there is a large section of our membership who just cannot do this. If you are in food manufacturing competing against international supply, it is very difficult. In the mid-market hotels in Scotland, the Chancellor's initiative will lead to a halving of the EBITDA over the next four or five years. There is a critical situation there and a balance to strike because those hotels may very well be able to remain profitable employing fewer people. One of the questions that we need to deal with is where is the trade-off? Both are valid goals. The CBI has always supported raising minimum wages. We put our shoulder to the wheel in the creation of the national minimum wage. I think the challenge is the pace and how. Would you like me to turn to the business pledge? There is a lot in the business pledge that our members like. If you look at the language around engagement, diversity, internationalisation, prompt payment, innovation, youth, community, those are all themes that we think businesses should be thinking about and should be taking action on. The two things that are particular issues, we have already talked about zero hours and you will know why we are positioned from that. The other one is this question of pay. It is very difficult for many businesses to be able to sign up to the living wage and that is why there are some challenges with the business pledge for many of the medium size and smaller members of the CBI. Are you aware of, in terms of your membership, how many may choose to sign up to the pledge and almost pay the accredited living wage? Percentage-wise, are you saying 40%, 80% or have you not really been able to measure that yet? We haven't done that work as yet. Are you prepared to do that work? I'm happy to take it away as a discussion to have with you in due course. Can I add just one other thing on the business pledge? I think what's really important when we talk about the living wages, we understand what the living wage is. Because there are real challenges for the living wage foundation based on Chancellor's announcement, the living wage rate is not a rate that a family with children can achieve the standard of living that the living wage foundation sets out on. That rate is actually higher and the living wage foundation already discounts it. It is important that the committee understands that even the living wage foundation is making a judgement based on its point of view about what the appropriate level would be. It's just important that there's no black and white in this issue. There are different goals and things that need to be arbitraged and I think it's just important to record that point. Isn't the main challenge that people need to be able to live with what they earn in terms of their actual health, their wellbeing? We're looking at standards here. Business has a responsibility to ensure that they're paying a fair wage to ensure that people can have a reasonable standard of living. Rather than having to maybe find that they're working maybe three or four different jobs just to maintain a reasonable standard of life, in fact, just to pay the bills, to be honest. As I said earlier, we've always supported raising the minimum wage. We've never demurred with what the LPC has done. While the Chancellor made a decision to raise the minimum wage to 60% of median income, the LPC has been raising the bike progressively through the recession and beyond. We have just had the first recession ever where the bottom 10% of the earners did better than the rest. Typically, they do a lot worse. That's a great success of the policy as it's been pursued. The other thing to remember is that raising the minimum wage does not necessarily benefit the poorest. You're looking at minimum. We're talking about living. Raising the living wage is the same. It does not necessarily benefit the poorest. Incomes are based on a household basis. It can give them a degree of certainty, can it not? Certainly, and it's an important part of the mix. But take the tax credits argument where, frankly, lots of businesses were deeply frustrated by the argument that tax credits subsidise low wages. Firstly, because businesses don't know what the benefits status of their employees are, nor should they ever do so. Secondly, because only 40% of people who earn the national minimum wage, so the very minimum, receive any tax credits at all because they live in households with higher earners. Those issues need to be taken into account in setting wage policy. Ten minutes left. I've got four members who want to come in, so we'll need to be sharp, please. Yes. Questions and answers. Gordon MacDonald. Thank you. Much, convener, and apologies for arriving late. I get caught in traffic. Before I go into my questions, you said the CBI have always put their shoulder to the wheel in relation to minimum wage. That's funny, because I had a look back at what you were saying before the minimum wage was introduced by the last Labour Government. And I quote, even a low minimum wage would reduce job opportunities and create major difficulties for wage structures in a wide range of companies. Is there any evidence of that or were you just scaremongering then as you're scaremongering now? You remember the living wage that was on the table in the early to mid-90s was what the TEC was calling for, half of the male manual median wage, which is an interestingly old-fashioned definition of what the minimum wage should be. And that was £6 an hour in 1998. Would that have cost jobs? Yes. Did the one we introduced cost jobs? No, on the basis that it was introduced responsibly because we put our shoulder to the wheel with others, with trade unions. We built one of the strongest social partnerships the UK as a whole has ever seen. And we then raised it quickly to a much more regrettable and much more regrettable way. The reality is that by increasing the living wage what you've done is you've made it easier to recruit better quality staff. You've got lower labour turnover and you have got employees who are more satisfied in their job. Therefore productivity increases and therefore there's been really no cost to companies because of that. In addition people because of the situation of being low paid through necessity have to spend that additional wage. They spend it predominantly in retail. Retail has to purchase from manufacturers etc. And therefore you have a knock-on effect in the economy and you grow the economy by the fact that you're actually feeding money, not to bankers but to people that are living on minimum wage who through necessity have to spend that money. I'll come back to where I was in the previous answer thinking of the conveners. In junction we've always supported rises in the minimum wage. We supported when it went up 10%. The issue for us is always the impact on affected sectors and small businesses. If you think about high streets in small towns in Scotland, those grocers, those bakers and their ability to remain competitive. There is a balance here about timing and the path and affordability. That's always been our concern. Two questions on zero hour contracts. The first one should zero hour contracts be about choice of the employee. There are some instances where a zero hour contract would be of benefit to an individual. Say a nurse who works full time and wants to do a couple of bank shifts or a student work round these exams. But the vast majority of people are looking for certainty so they can manage their household bills etc. Is it right that individuals are being forced to take zero hour contracts and would you support a moratorium on people being pushed into having to accept zero hour contracts? Secondly, is there a time span or a time period where people should be offered full time employment if they've been on a zero hour contract for a long period of time? I'm thinking of the TUC survey of August 2013 where they found that 44% of people on zero hour contracts had been on zero hour contracts for two years or more. And that 25% of people on zero hour contracts had been on zero hour contracts for five years or more. Now that doesn't strike me as being a company that's not sure of their profitability and they're basically keeping it. And Joan's already talked about the event we had in Paisley on Monday and I spoke to one individual who, working for a large company, makes fantastic profits and turned up for a night shift and was told, by the way we don't need you. And they said, well that's fine, we're getting paid, he just started. You know, we're getting paid. No, no, I'm just going to go home. He says, well wait a minute, I was told I had a job here and he didn't realise it was zero hour contracts. They said, yeah, yeah, we'll pay you if you stand at your bench and don't move. You can't use the facilities, you can't use the staff room, you have to stand at your bench and you'll get paid. He survived for three hours and then he left. He did get paid for those three hours but that's the way he was treated. Well that's not the picture of good employer relations that I was referring to earlier. We've said to colleagues in the trade union movement that we are happy to have a discussion with them about what an appropriate transition point is. We'd be very resistant to anything that either bans zero hours contracts or disallowed companies from hiring on to zero hours contracts. But if someone's been doing nine to five Monday to Friday for three years, then what they've got is a full time job and I'm very happy to be clear about that. So why would it be kept on a zero hour contract? Is it about invading employer responsibilities to the individual or is it about invading employee costs? Is that what drives it? Is it about keeping your overheads down? I think it's a desire to maintain maximum flexibility I assume. I mean I don't understand why you would do it personally. Okay, thanks. We need to move on. We're very short on time. Briefly Patrick Harvie. Thank you. You mentioned this claim that the most recent recession is the first where lower earners did better in terms of pay growth than higher earners. I have to admit as soon as I read that in your written submission I got my red pen out immediately to that one. In the last five years you're making this claim on the basis of minimum wage increases. In the last five years the minimum wage has gone up by 38p an hour for 18 year old workers, 77p an hour for workers over 21 years old. If they're working a full time week that might be something like 1500 quid a year. Can you tell me how much FTSE 100 CEO pay has gone up in the same time? Off the top of my head. No, but the point I was making was a distributional one. Nobody is out. The average pay of CEOs in the FTSE 100 has gone from 4.1 million to 5 million. Average pay in that time. Are you really telling me that the lowest earners have seen their pay increase by more than the highest earners in that picture? I know what I said was that lowest, I was making a point about 30 million people, not about 80 people. The point I was making was that the bottom 10% of the labour market has had higher rates of pay increase over the last few years than the other deciles. Can I just show you this graph in the Scottish Government's economic strategy? Well, can I just ask you then to reflect on whether that statement is not only flat wrong. Right, okay, okay. Thank you Patrick. Joan, I'm going to be brief. I'm sorry. Have you finished? Yes, carry on. Sounds like it. Well, I'm sorry. I mean, I made it very clear at the start. We need to cut the session at 10 o'clock. We've got one minute and 30 seconds left, so please carry on. One of the things that comes across strongly in our written evidence is that lack of control leads to poor health outcomes for workers, lack of participation. As well as what Governments can do, what we've also found is that countries where there's a lot of collective bargaining in workplaces, workers feel they can participate more and they also have higher wages. What's your response to that? Can you tell us, for example, what the trade union membership is of your members? The trade union membership in CBI members largely accords with the national average. So in Scotland, union presence is about 48% in workplaces and collective bargaining. Coverage is about 30 something off the top of my head. Look, we have always been clear that there's a role for trade unions where employees choose to be represented by trade unions. And we have a statutory recognition mechanism. Actually, it's rarely used because companies usually do a deal that works for them and the workplace in advance. It is clearly the case that that is one way to achieve good employee voice. There are others. We are very committed to the idea that employee voice and input and perceived control in the workplace is critical to successful workplaces. What's your organisation's attitude to the UK Government's trade union, Bill? That is a different matter because that is about strike action. It's about discouraging unions from being active in the workplace. So you're saying that you're in favour of it? I think that it is not unreasonable in the private sector to ask a quarter of union members to demonstrate that they want to go on strike before a union can go on strike. I think that perceived control works more than one way. Unions have to represent the views of their members. What the trade unions have said is that they are prevented from consulting their members in modern ways, for example through the internet and so on. The Government should encourage them to be able to communicate better with workers. On the one hand, you're saying that you're supportive of trade union membership, which we know from our evidence raises wages and raises the wellbeing of workers. On the other hand, you're saying supportive things about a piece of legislation that's going to really damage trade unions and workers' ability to organise. We've published joint work with the TEC in the past on the importance of facilities time and the importance of building good relationships with reps and supporting workplace reps. All that is vital stuff, but I'm sorry, we do not believe that if union leaders cannot demonstrate that a quarter of their people want to go on strike, that that is a mandate. That's all the bill does. It's 25, it's half of 50 per cent of the electorate. I don't think that's the view of the TUC or the STUC, but I'll leave it at that.