Every Little Helps

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90415419Michael-Taft

Tesco, Clearwater, Finglas, Dublin 11; Michael Taft

Many of the women and men who serve you in a shop, supermarket or department store are living in poverty and deprivation.

Michael Taft writes:

Workers at Tesco Ireland  have voted overwhelmingly for industrial action to resist the proposed wage cuts that management is demanding. The issue is now going to the Workplace Relation Commission. This post is not about the details of the Tesco dispute (you can read about it here).

However, it is timely to take a step back and look at wages that not only Tesco but all retail workers earn.

And when you sneak that peak you will find that retail workers in Ireland are some of the poorest paid in the EU-15.

grph

According to Eurostat (the baseline figures are from 2012, brought up to 2014 with the Labour Cost Index), Irish retail workers rank 12th in the EU-15. And these wages are well behind European averages.

Irish retail workers would need a 20 percent increase to reach the EU-15 average.

But when we compare Ireland with our peer group, the comparison deteriorates dramatically.

One peer group are Northern and Central European economies (NCEE). This is the EU-15 figure excluding the poorer Mediterranean countries (though it’s worth noting that Italian retail workers earn more than Irish). In this comparison:

Irish retail workers would need a 35 percent increase in the hourly average wage.

A second peer group is other Small Open Economies (other SOE). This is a comparison used by the IMF and it refers to economies with small domestic markets and a high reliance on exports, just like Ireland.

This category includes Austria, Belgium, Denmark, Finland and Sweden. In this comparison:

Irish retail workers would need a 54 percent increase in the hourly average wage.

Some may object to this, claiming that if a company is not profitable, it cannot increase wages.

This is true enough. But we are confronted with a problem: the last year we have comparative enterprise data in the retail sector is 2012 – a bottom point in the retail business cycle with the economy still mired in a domestic demand sector.

Although profits per employed was about 15 percent below the EU-15, profits in the foreign-owned sector (such as Tesco) was the highest in the EU-15. So even with the consumer economy at rock bottom, a substantial part of the retail sector was doing OK.

Of course, this information should be open and transparent – not only for the workers but for society as a whole. Currently, a high number of firms, especially in the retail sector, are not legally required to make public their full financial accounts.

These firms can be branch affiliates of foreign-owned firms (e.g. Tesco, Aldi, Lidl, etc.), private unlimited firms (Dunnes Store is a major example) and a range of firms whose turnover is below a threshold (yet they can employ a significant number of people). The new government should examine these inequitable and secretive provisions.

Nonetheless, recent trends are looking decidedly better. In the last year, Irish retail turnover increased by nearly three percent; in the EU-15 the growth rate was half that. And with a gross operating rate (profits as a percentage of profits) at the EU-15 average, the Irish retail sector is moving back to, if not already exceeding, European averages.

What can be done to drive up employees’ wages?

From the Government end, it could strengthen workers’ rights – the right to collective bargaining, the right of part-time workers to extra hours when they become available (this is already an EU Directive, just not one that operates here), legislate for Sunday premium and overtime, etc. All these would help promote wages.

From the workers perspective, the best thing is to join a union. Mandate – the retail union – recently published a survey which showed that workers in trade unions fare much better than workers outside unions. From the survey:

Retail workers in unionised employments earn an average of €13.03 per hour compared to €10.04 for non-union workers.

100 percent of unionised retail workers have pay scales with service increments, compared to only 14 percent in the non-union retail sector.

The average minimum hour contract for retail workers in unionised employments is 24, compared to 16 hours in non-union employments; a difference of approximately €100 per week.

16 percent of workers in the non-union sector say they work under zero hour contracts, whereas there is no evidence of zero hour contracts in the unionised retail sector.

Those are pretty powerful reasons to join a union.

Ultimately, the struggle over workers’ living standards is a combination of political action and workplace organisation. The retail sector is no different.

And there is a great need for that combined effort. Micheal Collins from the Nevin Economic Research Institute found that 42 percent of workers in the Wholesale and Retail sector were paid below the Living Wage level.

Many of the women and men who serve you in a shop, supermarket or department store are living in poverty and deprivation.

That is economically inefficient, socially obscene and ultimately resolvable at a political and industrial level.

Victory to the retail workers – to the Tesco workers, to all workers who serve us every day: economic and social prosperity depends on it.

Michael Taft is Research Officer with Unite the Union. His column appears here every Tuesday. He is author of the political economy blog, Unite’s Notes on the Front. Follow Michael on Twitter: @notesonthefront

Note: Data for wage chart can be found here and here. To get specific data on profits is to run through a maze but a short-hand can be found here with provision to adjust for working hours here.

Rollingnews

37 thoughts on “Every Little Helps

  1. rotide

    I have a confession. I never read Michael’s columns.

    They might be the best thing on broadsheet, but for some reason I just skip over them.

    Maybe if he wore a leather jacket and came up with some sort of catchphrase and did them in vlog form, then I’d be all over it.

      1. rotide

        Yeah, I read one of the first ones and it was good. The stats and venn diagrams put me off though.

        I like my social justice in emotive hyperbolic form.

    1. Michael Taft

      This is the total of employee compensation (wages, social insurance) and labour costs. The total could be labelled just as ‘labour costs’ but as I don’t believe wages are a ‘cost’, I tend not to label wages and social insurance as such. But this is the total amount that employers pay per hour.

      1. Rob_G

        I think that this is a bit misleading; the graph is more of a reflection of which countries have the highest taxes, rather than which country’s workers are the best paid.

        (Belgium’s taxes and social insurance costs are staggeringly high, even for relatively low-paid workers).

        1. Michael Taft

          Just to point out, Rob_G, social insurance is part of an employees’ compensation. It is called the ‘social wage’. Out of this payment, workers get access to free health services, subsidised prescription medicine, pay-related benefits (such as unemployment, sickness, state pension) and stronger family benefits. Workers on the continent, including Belgium, benefit from these because of their high social wage; we don’t because ours is very low. This helps explain why our living standards are so low compared to other EU-15 countries.

          1. Rob_G

            “social insurance is part of an employees’ compensation”

            – I would be very surprised if many workers shared your view; I pay Belgian taxes, and I’m not sure that my fellow PAYE workers here would feel better compensated than our Irish counterparts on the account that we pay much more taxes.

            (btw, I appreciate you taking the time to debate with commenters on your articles).

          2. Fact Checker

            Employers’ social security contributions are of course part of employee compensation (the economic definition).

            You would struggle to find one Belgian retail worker in 100 who could tell you how much it is though.

          3. Michael Taft

            Rob_G – the social insurance referred to in employee compensation is paid by the employer, not the employee. It is different to the taxes paid by workers (income tax, employees’ social insurance). And thanks for the comment.

            Fact Checker – I accept that workers may not know the amount of social insurance their employers pay, but they may know how much they pay when the visit a GP or how much pay-related benefit they get if they are made redundant (something like 70 – 80% if memory serves me). Workers here also know these prices and supports.

          4. Fact Checker

            Thanks Michael. I too appreciate you engaging with commenters.

            You are right of course, out-of-pocket payments in Belgium for health are considerably lower than in Ireland which is nice for workers. I am not so sure that compulsory insurance is great value though for young, healthy, low-skilled workers who want something part-time or temporary and find that jobs are hard to find because of the size of the tax wedge.

            Second, the customer experience in Belgium is the worst I have experienced outside post-Soviet countries (also due to product market regulations). Prices are high, customer service is terrible, opening hours are short and queues are long. There are a lot of good things about the Belgian landscape, but it comes with its drawbacks too.

      2. Owen C

        Ok. I won’t go quite as far as saying this is misrepresentation, but its certainly a discussion about two slightly different things. Wages are not the same as labour costs. If you’re saying employers have cheaper access to labour, that is correct. But it is not as easy to say how much Irish workers are ‘underpaid’ v-a-v wages, per your comment:

        “According to Eurostat (the baseline figures are from 2012, brought up to 2014 with the Labour Cost Index), Irish retail workers rank 12th in the EU-15. And these wages are well behind European averages. Irish retail workers would need a 20 percent increase to reach the EU-15 average.”

  2. Jake38

    I would imagine if we had an economy with the productivity of Sweden or of Denmark we could afford their level of wages for unskilled labour. Get back to me when that happens.

    1. Sullery

      Ireland has the sixth highest rate of labour productivity in the EU, behind the Low Countries, France and Germany. The bar chart in the article shows a broad correlation between productivity and wages, with Ireland being a pronounced outlier.

      1. Fact Checker

        This is because of the FDI sector which has massive production here but proportionately lower employment. Even still, its workers are very well paid.

        Conceptually, you need to split the business economy into its foreign-owned and Irish-owned components.

        Irish-owned private sector firms are simply not very productive. This is where approx 3/4 of private sector employment is and is why average wages are low.

        Productive Irish firms (think Paddy Power, Kerry) break into overseas markets and quickly employ more staff outside Ireland (because that’s where the customers are).

  3. Moneylender

    The amounts are for labour costs which, including as they do, payroll taxes, pension and other benefits are not the same as workers earnings. It is well know that such taxes and benefits are higher in the Nordic area than in Ireland. This is one of the pluses in attracting business to Ireland.
    I’m not saying that retail workers should not be paid more – just that we need to use accurate statistics and not bend these to suit our position. Also, the is a danger is measuring against averages.

  4. John Roberts

    I hate to think that people are being exploited but I also hate when either side of an argument only give one side and hold back on some info that would help an informed opinion. Could Michael give us the average hourly rate paid as there are quite a lot of part-time workers in retail. There could be a huge difference in hours worked on average across the EU which will totally distort the results. Over to you Michael

  5. Fact Checker

    I would fully agree with Michael’s point that retail margins in Ireland are (traditionally) high although we can’t really know this because the firms do not disclose the data. The main reason the two German discounters have done so well in the last ten years is because they have undercut the incumbents (both UK- and Irish-owned) considerably to gain market share. The big beneficiaries of this are of course consumers, and disproportionately low-income consumers, because they spend more of their incomes on retail goods.

    On wages the reason that they are low is because the work is low skilled. I was a teenager in the mid-90s during the short window where:
    -You could still work at 15
    -Wages were low but labour demand was growing
    -There were very few immigrant workers
    My local supermarket was staffed to a large extent by 16-years olds working part-time on wages which were about €4.50 per hour in today’s money (they all thought they were in heaven btw). This is all gone now I believe, it is adults on longer hours on something closer to €10 per hour. I have a huge amount of respect for retail workers. It is physically demanding and monotonous. At the same time it is low skilled and little will change that. If firms could employ 16-year olds to put items on shelves and through scanners again for €4.50 again they would. Putting a floor on wages will just reduce employment opportunities for low skilled adults, and there are plenty of these. Is this a social outcome that we should aspire to Michael?

    Finally, I have lived and shopped in some of the countries where retail wages are higher. What strikes you is that there are far fewer staff. Stores are much more capital intensivee, as much as possible is automated. On the flipside, the customer experience is not great. Queues are long, opening hours are short and staff are often rude. I much prefer shopping in Ireland (or the UK or Spain for that matter) than France.

  6. Tish Mahorey

    It brings to mind the likes of Walmart in the US who pay their employees so little that they need assistance from state welfare to survive which means the Government is subsidising Walmart and contributing to their profits margin. So their profits are largely due to state intervention as opposed to mark up on their goods for sale. It’s an entirely false business model based on exploitation rather than good retail business.

    They also used to take out life insurance policies against their employees (unbeknown to the employee) and cash them in if the employee died.

    Nice people.

    1. MoyestWithExcitement

      Plus the family that owns Walmart have 40% of all the wealth in the US and their staff STILL need welfare. I’m sure some of the obvious volunteers above can come up with some convoluted reason to defend that as well.

      1. Owen C

        “Plus the family that owns Walmart have 40% of all the wealth in the US”

        Sorry, what? Household wealth in the US sums to around 60 trillion dollars. The Waltons do not own 40% of this. Fail.

    2. Fact Checker

      Or you could argue that government subsidies support jobs that aren’t viable at the wage that clears that market.

      Or more realistically it’s a bit of both (if you are curious google “tax incidence”)

      I focus on two things:
      Low wages are better than low wages
      Low-priced retail benefits the poor more than the rich

      1. MoyestWithExcitement

        “Or you could argue that government subsidies support jobs that aren’t viable at the wage that clears that market.”

        If you were deliberately trying to spin the situation, you could. Businesses are not philanthropic projects. The majority do not care about people. Staff, ie human beings, are a necessary evil who should be paid as little as possible. They hire someone because they need them to do something, not because they’re feeling generous. (Supply aude economics is an intellectually offensive lie) If a job isn’t viable, it won’t exist. The Walton family owning 40% of all the wealth in the US while their staff need food stamps is nothing short of criminal.

        1. Fact Checker

          Your claims (theoretically or empirically) are not formulated in any way that I am able to engage with so I will leave you to it. Good day!

          1. MoyestWithExcitement

            That’s very odd behaviour. You didn’t even try to engage. And when I say odd behavior I mean suspicious. Which claims are you disputing?

          2. Owen C

            “The Walton family owning 40% of all the wealth in the US while their staff need food stamps is nothing short of criminal.”

            This one in particular is bizarrely idiotic

  7. Mister Mister

    Did Michael actually look into the details of the Tesco dispute and the terms and conditions that the pre-96 workers are on? Does he think for example it’s ok to employ a baker or butcher in a store where there’s no bakery or butcher and for them, and their union, to insist they still work as if there were, i.e. coming in early for non existing preparation?

    Did he also take into account other benefits such as employee share schemes ?

    I’ve no horse in this race, I’ve worked in retail over the years and have a good idea of who is good and not good to work for, but this article seems to start off biased against Tesco, and I’d question the accuracy of the claim that “Many of the women and men who serve you in a shop, supermarket or department store are living in poverty and deprivation.”

    Some I’m sure are, but not due to the fault of the retailer employing them.

    1. MoyestWithExcitement

      You’ve no horse on the race but the unions are asking for nonsense and the author is biased against Tesco. Hmmmmm.

      1. Mister Mister

        So by your reckoning anyone with a contrary view to the authors viewpoint is automatically management in Tesco or something?

  8. Mister Mister

    “Victory to the Tesco workers”. What nonsense. Like I already said, critically evaluate what the minority of these workers are looking for and you’ll see it for the nonsense that it is.

  9. Kieran NYC

    Didn’t the EU just propose new rules whereby the foreign subsidiaries of corporations would have to publish their accounts separately?

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