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 [uhappy[/u 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.



Your arguments ignore the most important point. [uThe wages paid are not enough to live off[/u. 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.

Indeed.

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.

[url=http://www.independent.co.uk/news/business/analysis-and-features/high-fidelity-julian-richer-rewards-staff-loyalty-with-holiday-homes-and-trips-on-the-company-jet-next-hes-planning-their-inheritance-8952760.htmlYou can be a profitable boss – and a decent one.[/url

Sounds like he's got a moral compass – which brings us back to Dave's question.

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.

[urlhttp://www.cleveland.com/business/index.ssf/2013/11/walmart_could_raise_wages_with.html[/url

It's obviously not the consumer who drives this. It's the the level of profit the company chooses to take.



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.

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.

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?

[url=http://www.unison.org.uk/news/living-wage-could-create-58-000-jobs-says-leading-economistNew research says living wage could create 58,000 jobs.[/url

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

I don't think [iare[/i 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."



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?

What needs to be looked at, and I believe Kelvin is alluding to, is Walmart's return on capital employed versus its cost of capital. Without that information the $15 billion figure is meaningless.

I do not know anything about Walmart's situation but it could be that $15 billion represents a marginal effective return and by increasing wages the company would be starved of capital for expansion / reinvestment. If that were the case the company would rapidly contract and employees lose their jobs anyhow.

That is quite an inspiring article, full of some very pertenant facts and not a little irony given the current discussion.

This is very interesting.

"It was no surprise to hear Richer, 54, [uwho still holds 100 per cent of the company[/u he started 35 years ago, explain this week how he has formed a trust for when he dies so that the business becomes a mutual, similar to John Lewis, under which every staff member receives an equal share, with the IT director, Julie Abraham, stepping up to managing director."

Not only is the idea of a trust fantastic the fact he owns 100% of the business is what allows him to do this. It's the same as John Caldwell and Phones 4 U when he used to run that. It was not listed on the stock exchange and as a result it made him rich but it also allowed him to pay his employees very well without the constant pressure to drive down costs (wages!) to improve profit..

The irony comes from this:

"Others have taken note. Richer is in huge demand as a consultant ([uAsda[/u, BAA and Halifax are just three, much bigger firms to benefit from his wisdom) and motivational speaker."

Has anyone told the Walton family the UK arm of its business is trying to learn of Julian Richer?

The other irony is this:

"Richer grew up in Bristol, the son of parents who worked for Marks & Spencer ([uit was from their tales of M&S, which also famously treated its staff [/uwell with perks such as a good canteen and hairdresser, that he developed the notion of the Richer Way). "

This is long gone. I have a relative and a neighbour who work for them and I can assure you The Richer Way has long left the M&S building. And funnily enough they aren't considered that brilliant a retailer any more. Certainly not compared to John Lewis.

It's not meaningless because even with $15bn of profit we end up with poverty wages.

Whatever the return on capital is this, it is not delivering an equitable situation. And the fact that is the reality of the situation leads to the question is this morally acceptable?

They used $7.6bn to buy back shares. That says they are not running on any such tight margins such that they need to screw their employees to generate $15bn profit. They are screwing their employees in order to inflate what they saw as an under valued share price and the increased share price boosts the wealth of the Walton family who own over 50% of the shares.

Seems pure greed to me!

How do you know they don't have low margins? They are a large enterprise, I hav no idea what $15 billion profit represents to them. Do you?

It represents the ability to spend $7.6bn on a share buy back to inflate the Walton family personal fortune by driving the share price up. What bit of this did you miss?

Seems Walmart made net profit of c. $17 billion on turnover of c. 469 billion in their latest reported year. So, about 3.6% of turnover. Couldn't readily see staff numbers and what % of revenue staff costs represent. But, it would seem liklely that a big hike in wages would wipe out profit.

So, is your argument that because Walmart pays low wages it should not exist at all, which is how I interpreted what you said? That being the case an awful lot of (largely) Americans would be unemployed and an awful lots of low-priced stores would close. Surely that would cause alot of suffering as there are few unskilled manufacturing jobs to take up the slack (indeed supermarkets have taken up the slack from de-indusrtrialisation).

So, you've identified a "problem", what is your solution?

See my immediately following post, wriiten simultaneously.

The Walton's set up the company to run a business and earn themselves (and others) a return. They did not establish a charity (or at least Walmart was not established as one). If someone wants to run a business for the benefit of their workers or some wider ideal then they can do and they will need to compete with Walmart et al should they wish to be retailers.

Absolutely. I think you've hit a nail on the head about where at least part of the problem lies.



Spot on again.

Over the years, the quality of service – which has cost [ime[/i time and money – at a number of retailers that might appear to be cheaper than John Lewis (forgetting the 'never knowingly undersold' thing) has ensured that now, if I need household goods, say, I go straight to JL and, where I use a supermarket, it's Waitrose too. It seem that a number of retailers no longer care about customer service.

But there's also the related point that increasing numbers of businesses seem to see their employers simply as a cost – to be cut as much as possible – and not as an investment, which partly brings us back to the living wage, as mentioned earlier. Not only is it better for individual employees – it's better for business, if business is prepared to be slightly less short-sighted and short-term in thinking. I do wonder how much the pressures of the Stock Exchange/City exacerbate this.

There's also the wider point that, quite simply, the current situation is not sustainable. And why does anyone want to keep pushing an unsustainable approach?

If you think JL customer service is good try ordering carpet / flooring from them and see what happens when things go a bit wrong!

Likewise I have also received good service from RS to the point where I may need a new main TV set before xmas and will be buying it from RS, have done the price comparisons and they are within £10 or so of the very cheapest retailer (Tesco), so the choice is, do I buy a TV set from Tescos or from a specialist retail outlet who only employ people who actually know what they are talking about ?

Hmmm



They are lucky in that they have a niche market where employing generic shop assistants isn't really an option, they need to employ experts to advise the (often) geeks who shop in there, AND they also take it beyond the selling boxed TV Sets to doing full home cinema installs, and commercial installs, so they do have to know their onions.

Well I'm going on my experience – and reports from a number of people I know – and I suspect we outnumber you, Dally.

I used to love going into the Virgin Megastore on Oxford Street, to the classical music section. The staff in there really knew their stuff. They could suggest things to you that almost always worked for you. I might be able to get things cheaper from Amazon, but I miss that experience and that human interaction.

HMV at Piccadilly Circus had been like that too, before it closed.

What really grates with me is the Walton family actively and aggressively employ any meaures they can to avoid or minimise paying federal and state taxes. They then expect the US and UK taxpayer to pick up their slack on behalf of their employees.

Frankly, on that basis alone, they're filth.

It surely wouldn't be that difficult to assess the total goverment support (tax credits, housing benefits etc) paid to subsidise a company's employees. HMRC could then simply present the company with an annual bill, including all costs of calculations, to reimburse the exchquer. That might be one way to concentrate a few minds away from paying less than subsistence wages