[DaveO]

Re: Asda price? : Thu Nov 21, 2013 1:29 pm  

Kelvin's Ferret wrote:

I think you're missing something explicit in what I wrote, people shop at these places because the prices are low, the prices are low (at least in part) due to low wages paid to staff, because wages are one of the biggest variable costs that a business has.

I didn't miss it. It was in fact that very point along with this unrealistic point:

"If people boycotted these businesses and took their cash to those who paid higher wages, and consequently charged more to the consumer change would happen. "

...I was responding to.

It is practically impossible to avoid shopping at "unethical" shops and the fact some people seek out the lowest price is a necessity not an obsession with saving money. The fact the low wages of those employed there allows them to do this is a problem in itself not part of a solution that delivers low cost goods to equally poorly off people!

I was also making the point that boycotting such places won't bring about social or economic change. It's politicians and bodies like trade unions and other campaign groups that do that. And while they campaign life goes on and these unethical business still attract customers who may well support the campaigns against them. That isn't a paradox either.

You also actually said "people are happy to consume from businesses that pay low wages ". I would suggest they are happy to pay low prices but don't really have much of clue about the wages paid. I am sure they would also prefer it if the employees were not paid wages not enough to live off. That is also not a paradox.

You could force a statist intervention to raise wages, but that will just push the higher cost somewhere else, like higher prices which the customer will then have to pay (they might squeeze the supply chain, but that just pushes it around - lower wages somewhere else). It's the same circular logic as goes round in tax incidence arguments, nobody doubts its possible to force higher costs, its only self-deception that believes these higher costs will not simply flow to the groups that ultimately bear the costs in a different way.

Your arguments ignore the most important point. The wages paid are not enough to live off. Where does your personal moral compass lie with that?

It's also not clear in the Wall Mart case that paying the 800 odd thousand staff who earn less than $25K a year, $25K a year would have the affect on costs you state given the vast profits made. Smaller profits, yes but a more equitable distribution of profit between the employees and the shareholders, not necessarily higher prices.

In my opinion there is a willingness and desire of some businesses to devise ever more exploitative employment t&c's in an effort to keep costs down. This is not motivated by a desire to lower prices but to increase profits.

I feel currently there is a climate that if a company could charge a fortune for its goods for whatever reason there are companies in that position who would still exploit their employees. Put it this way in Wall Mart's case if they could slash their wage bill or other costs by a third I doubt you'd see a 1/3 off prices. Many modern businesses seem to have lost the concept that paying their employees well is a good thing for their business. Maybe they have concluded they don't need to. Maybe a high turnover of slave labour will still deliver the required return to shareholders.

If so this is where that "statist intervention" you mention has to occur. It's called regulating the market and the fact Wall Mart pays wages not enough to live off should be telling us more regulation of the market is required to deal with Wall Mart's exploitation of its work force.

The cost you mention is already pushed elsewhere anyway. The taxpayer subsidises the business. In the Wall Mart case in the USA the majority of employees can't afford the deductions from their wages to pay the necessary employee contribution to "company provided" heath insurance. So they rely on public health services such as they are that thus cost the tax payer a fortune.

Re: Asda price? : Thu Nov 21, 2013 1:44 pm  

DaveO wrote:

... Your arguments ignore the most important point. The wages paid are not enough to live off. Where does your personal moral compass lie with that? ...

Indeed.

Re: Asda price? : Thu Nov 21, 2013 1:58 pm  

Mintball wrote:

When a company in "the real world" is massively profitable, it's pretty easy to see where the money can come from. And Wal-Mart apparent profits of more than $15 billion in 2012.

Only people who rate increased profits above a workforce being paid decently would conclude otherwise. For clarity: I'm not saying profit per se is a bad thing or that a company should not make profit. But that when companies make vast profits, it's pretty easy to see where the money for decent wages can come from without any great suffering and without the costs being hoiked onto the suppliers etc.

Why should the taxpayer be left to pick up the tab when hugely profitable companies pay such low wages that people cannot afford to live? Or perhaps people should just have to choose between, say, food and heat?

And that's without mentioning the knock-on effects on the wider economy.

And the likes of Wal-Mart is already screwing suppliers and producers. Every time they announce more cuts to prices, they hand on the cost of those deals. This is well documented.

Are you really suggesting that the corporate world is no place for ethics or morality? If that's the case, perhaps it will be acceptable for chronically low paid workers to steal from the store to feed themselves?

It's massively profitable because it pays low wages and people want to buy from it as a result.

So, ultimately it is the "consumer" who drives the wages. Waitrose offer an alternative model in the UK but the vast majority of people cannot afford to shop there or choose not to.

Until people are educated and care about their actions nothing will change. If people accepted higher grocery bills and cancelled their cheap foreign holidays, weekend breaks, etc the country would be alot better.

Re: Asda price? : Thu Nov 21, 2013 2:16 pm  

You can be a profitable boss – and a decent one. Sounds like he's got a moral compass – which brings us back to Dave's question.

You can be a profitable boss – and a decent one. Sounds like he's got a moral compass – which brings us back to Dave's question.

[DaveO]

Re: Asda price? : Thu Nov 21, 2013 2:28 pm  

Dally wrote: It's massively profitable because it pays low wages and people want to buy from it as a result. So, ultimately it is the "consumer" who drives the wages. Nonsense. As has been pointed out with profits of $15bn it could afford to pay its 800 odd thousand worker who earn less than $25K more without affecting prices. http://www.cleveland.com/business/index.ssf/2013/11/walmart_could_raise_wages_with.html It's obviously not the consumer who drives this. It's the the level of profit the company chooses to take. Waitrose offer an alternative model in the UK but the vast majority of people cannot afford to shop there or choose not to. Until people are educated and care about their actions nothing will change. If people accepted higher grocery bills and cancelled their cheap foreign holidays, weekend breaks, etc the country would be alot better. Who can afford or chooses to shop at Waitrose has nothing with why Wall Mart exploits its employees. People boycotting low wage employers or being educated didn't bring about the minimum wage either. Nor will them being educated and caring about their actions force change on the likes of Wall Mart. Reguation of the seemingly unfettered market is the only thing that will force such change. Arguing its all our fault for buying cheap goods is a cop out justification for the excesses of capitalism.

Dally wrote: It's massively profitable because it pays low wages and people want to buy from it as a result. So, ultimately it is the "consumer" who drives the wages. Nonsense. As has been pointed out with profits of $15bn it could afford to pay its 800 odd thousand worker who earn less than $25K more without affecting prices. http://www.cleveland.com/business/index.ssf/2013/11/walmart_could_raise_wages_with.html It's obviously not the consumer who drives this. It's the the level of profit the company chooses to take. Waitrose offer an alternative model in the UK but the vast majority of people cannot afford to shop there or choose not to. Until people are educated and care about their actions nothing will change. If people accepted higher grocery bills and cancelled their cheap foreign holidays, weekend breaks, etc the country would be alot better. Who can afford or chooses to shop at Waitrose has nothing with why Wall Mart exploits its employees. People boycotting low wage employers or being educated didn't bring about the minimum wage either. Nor will them being educated and caring about their actions force change on the likes of Wall Mart. Reguation of the seemingly unfettered market is the only thing that will force such change. Arguing its all our fault for buying cheap goods is a cop out justification for the excesses of capitalism.

Re: Asda price? : Thu Nov 21, 2013 3:26 pm  

DaveO wrote:

Your arguments ignore the most important point. The wages paid are not enough to live off. Where does your personal moral compass lie with that?

I don't have a relationship with Wal-Mart as far as I'm aware, I rarely shop at ASDA, not out of any guilt but simply because there isn't one near me.

However, I'm not telling people they should shop there, shouldn't shop there, should work there, shouldn't work there. I am sticking to reality and saying that if people go there for low prices it is because costs are low, and for most businesses staff costs are the big variable cost they squeeze to get low costs. I don't advocate poverty wages as a business strategy, I think there are often better ways, but not neccessarily ones you'd be happy with. Business will pay higher wages when they see higher productivity as a return on that, but the flip side is that with higher productivity you need less staff but better skilled staff and capital investment in technology. That's just the nature of adding capital to labour, I read it expressed recently as like replacing ten men with shovels with one man and a mechanical digger, the man operating the digger gets more money than a man with a shovel. Now, it may be that the for Wal-Mart there is weak opportunity to replace low skilled labour with capital investment and higher skilled labour, I don't know. But higher wages without increased wage costs means increased productivity, and that means less staff; higher wages without increased productivity means higher costs, means higher costs that flow to whoever bears the costs.

The profit issue can become a bit of a red herring, most investors look for a normal range of return on investment, a certain percentage that varies based on the industry and the level of risk (I don't know what this is for Wal-Mart btw). Quoting huge headline figures is misleading without knowing what the return on investment is, $15bn is only a good return for the investor if each $ invested is generating more than that same $ could earn invested in something with a similar risk profile. By all means people can look at it very simplistically and say we'll slice a chunk off $15bn, but if $15bn is a normal return on investment on the amount of capital invested then it's a silly idea. This is the same sort of silly trap people fall into when they advocate Tobin taxes that shave pennies off billions of daily financial transactions, what they don't look at is what percentage of the value of those transactions they are actually looking to take i.e. taking 2p off a billion transactions looks great unless each transaction only generates 1.5p of profit, at which point the idea collapses.

Re: Asda price? : Thu Nov 21, 2013 3:39 pm  

Mintball wrote: You can be a profitable boss – and a decent one. Sounds like he's got a moral compass – which brings us back to Dave's question. Based on my experience of Richer Sounds (which are positive), I would strongly suspect he employs fewer but better paid and more productive employees than some of his competitors. There is actually a fairly long-standing business mantra that lots of companies pay lip-service to, but few actually genuinely follow, in that if you focus on quality rather than cutting costs your costs will drop as a result of quality. The problem is that it doesn't fit with modern "managerialist" style management popular in most large organisations where generic management lack expertise needed to bring real focus on quality whilst short-term pressure to cut costs undermines efforts to improve quality and drive down long-term costs.

Mintball wrote: You can be a profitable boss – and a decent one. Sounds like he's got a moral compass – which brings us back to Dave's question. Based on my experience of Richer Sounds (which are positive), I would strongly suspect he employs fewer but better paid and more productive employees than some of his competitors. There is actually a fairly long-standing business mantra that lots of companies pay lip-service to, but few actually genuinely follow, in that if you focus on quality rather than cutting costs your costs will drop as a result of quality. The problem is that it doesn't fit with modern "managerialist" style management popular in most large organisations where generic management lack expertise needed to bring real focus on quality whilst short-term pressure to cut costs undermines efforts to improve quality and drive down long-term costs.

Re: Asda price? : Thu Nov 21, 2013 3:41 pm  

Kelvin's Ferret wrote:

Based on my experience of Richer Sounds (which are positive), I would strongly suspect he employs fewer but better paid and more productive employees than some of his competitors. There is actually a fairly long-standing business mantra that lots of companies pay lip-service to, but few actually genuinely follow, in that if you focus on quality rather than cutting costs your costs will drop as a result of quality. The problem is that it doesn't fit with modern "managerialist" style management popular in most large organisations where generic management lack expertise needed to bring real focus on quality whilst short-term pressure to cut costs undermines efforts to improve quality and drive down long-term costs.

The living wage is another example of this – with companies such as KPMG having become a cheerleader for it on precisely these sort of grounds (improves retention, recruitment, levels of sickness, productivity etc).

The mantra you refer to – isn't it something about paying peanuts?

Re: Asda price? : Thu Nov 21, 2013 3:53 pm  

New research says living wage could create 58,000 jobs.

New research says living wage could create 58,000 jobs.

[DaveO]

Re: Asda price? : Thu Nov 21, 2013 3:53 pm  

Kelvin's Ferret wrote:

I don't have a relationship with Wal-Mart as far as I'm aware, I rarely shop at ASDA, not out of any guilt but simply because there isn't one near me.

However, I'm not telling people they should shop there, shouldn't shop there, should work there, shouldn't work there. I am sticking to reality and saying that if people go there for low prices it is because costs are low, and for most businesses staff costs are the big variable cost they squeeze to get low costs. I don't advocate poverty wages as a business strategy, I think there are often better ways, but not neccessarily ones you'd be happy with. Business will pay higher wages when they see higher productivity as a return on that, but the flip side is that with higher productivity you need less staff but better skilled staff and capital investment in technology. That's just the nature of adding capital to labour, I read it expressed recently as like replacing ten men with shovels with one man and a mechanical digger, the man operating the digger gets more money than a man with a shovel. Now, it may be that the for Wal-Mart there is weak opportunity to replace low skilled labour with capital investment and higher skilled labour, I don't know. But higher wages without increased wage costs means increased productivity, and that means less staff; higher wages without increased productivity means higher costs, means higher costs that flow to whoever bears the costs.

And the suggestion is, given the level of profit, the shareholders should bare that cost.

I don't think are dealing with reality. There no suggestion Wall Mart is going to replace low skilled labour with higher skilled or could if it wanted to. This is not an industrial revolution scenario. It's about a equitable distribution of the profits.

Winston Churchill had it right whe he made the case for a minimum wage in 1909:

"It is a national evil that any class of Her Majesty’s subjects should receive less than a living wage in return for their utmost exertions… where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes up the trade as a second string… where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration."

The profit issue can become a bit of a red herring, most investors look for a normal range of return on investment, a certain percentage that varies based on the industry and the level of risk (I don't know what this is for Wal-Mart btw). Quoting huge headline figures is misleading without knowing what the return on investment is, $15bn is only a good return for the investor if each $ invested is generating more than that same $ could earn invested in something with a similar risk profile. By all means people can look at it very simplistically and say we'll slice a chunk off $15bn, but if $15bn is a normal return on investment on the amount of capital invested then it's a silly idea. This is the same sort of silly trap people fall into when they advocate Tobin taxes that shave pennies off billions of daily financial transactions, what they don't look at is what percentage of the value of those transactions they are actually looking to take i.e. taking 2p off a billion transactions looks great unless each transaction only generates 1.5p of profit, at which point the idea collapses.

But this still doesn't answer the moral question (which has nothing to do with if you personally shop at Asda or not BTW).

What you are suggesting is $15bn profit is possibly (you don't know for sure) an acceptable return on investment in comparison to investing this money elsewhere. Right?

Well if that is true one of the effects of achieving this level of ROI is poverty wages at Wall Mart and also, I would suggest, exactly what WC was arguing against.

Do you find a system that gives us this perverse result of $15bn profit and poverty wages a morally acceptable system?