Tuesday, 10 December 2013

Employment Markets

From the BBC:

The boss of Domino's Pizza should "probably pay his staff a little more" if he wants to recruit extra workers, the UK's immigration minister has said.

Chief executive Lance Batchelor has complained that he has been unable to fill 1,000 vacancies since migration rules were tightened up.

But minister Mark Harper said Domino's should "reflect" on salaries, adding: "It's a market."

He said the law would not change "just so he can keep his wages low".

Mr Batchelor, who is leaving Domino's to work at Saga, told the London Evening Standard the pizza takeaway and delivery chain was "struggling to get enough employees", especially in London and the south east of England.

He added: "People who would have worked here a few years ago now don't want these jobs. We could fill 1,000 jobs across the UK tomorrow if we could get candidates to apply for them."

The minister is talking nonsense here.

If this is simply about free market competition, why are there 1000 jobs going when there's 2.487 million people who are unemployed, i.e. earning nothing? In a market, wouldn't some of those people take those jobs?

Of course, what we're really dealing with here is the state interfering in the labour market via the benefits system. If you take a job, you lose some or all of your benefits, which means that at the worst level, you can see massive effective tax rates for those moving from unemployment to employment.

And while Domino's isn't a great job, it is still working, it is still earning money. And probably more importantly, it's experience of work, it's a step, it shows at least a certain level of discipline - that you can get out of bed and turn up on time and do a day's work.

One of the things that makes me angry about the elite class in this country is how little they understand about real work experience. They bang on about qualifications and apprenticeships, but if you meet people in say, regional management in retail, a lot of them started out on a till. They took that job, showed they were good at it, and the next job, learnt a lot along the way, and eventually ended up watching over dozens of stores. And it's the same in factories. They actually don't care that much about qualifications because they're mostly hiring people to watch over a printer. They'll show you what to do for starters, the rest you'll pick up on the job. Doesn't need a degree or an apprenticeship. If you show you're good, you might get to do something better.

The trouble is, we often don't create jobs, or replace jobs with machines, or farm work out to India or China, because it's cheaper. And we don't get those people in at the ground floor. We consign them to the scrap heap. It's doing none of us good. And we should bring in a Citizen's Income that will stop it.


Mark Wadsworth said...

Agreed, rather unsurprisingly. But fair play to the Domino's guy for coming out and just saying it, and damn the critical backlash.

Kj said...

TS: I think the pols, or at least their advisors, are quite aware that the policies of high taxes on labour, either directly or implicitly through welfare withdrawal, creates most unemployment among the low-skilled. It´s just a price they are willing to pay to offer what they get voted in for. A social-democrat pol just wrote a column in a norwegian newspaper today, saying more or less: "our model is one of high taxes and regulations, which causes companies to invest in labour-replacing capital, causing a need for a highly educated workforce and welfare to catch the fallout, which is why we have to have even higher taxes to pay for more education and welfare".

The Stigler said...


Ta. And yes, fair play to him.


That's exactly the sort of attitude I'm talking about. You could put the same speech into Cameron's or Miliband's mouth. And the elites that run politics and the mainstream media in this country wouldn't question it.

Because the elites have no real idea about the grubby world of commerce. They assume it's all like big, unionised places like Rolls-Royce and Airbus or that those are realistic models, rather than unusual, specialised, highly regulated companies.

Kj said...

TS: they don´t need to know about the grubby world of commerce, they are probably not fit for that scene anyway, hence their current choice of income. What they do need to start owning up to, is the barriers they set up between people doing exhanges with each other. Forget about tobacco control, porn censorship and what not, the single biggest control the pols have over us is in the economic sphere. I call people on this, mostly leftists, who have all the best intentions in the world, but they just can´t realise how reckless they are in deciding people´s place in society, confining so many people to never be able to taking part in some function for the benefit of themselves and others. Everything revolves around catching the fallout without recognising their fault in creating it in the first place. Argh.

DBC Reed said...

How is Citizen's Income going to nudge the unemployed into godawful jobs for the experience of working and all that which you say is worthless anyway as any mug can do most jobs? I thought the CI gave the independent- minded the freedom to turn down crap jobs and only do what was interesting and appropriately paid.That's why I support it.

Mark Wadsworth said...

DBC, you get your CI and you takes your choice. Take a low paid job and at least you aren't clobbered by means testing and a million forms; hold out for something better (which is usually best achieved by starting at the bottom, fact) or take up painting, or go to college, that's your decision.

But there is no special incentive to being/remaining unemployed.

Derek said...

One of the effects of CI is going to be to act as a subsidy to employers. I think that our experience of previous CI-like systems like Speenhamland show that. It doesn't matter whether the CI is £120 per annum or £120,000 per annum, that will happen. However once the CI level rises above the minimum required for daily life, there will be a countervailing effect whereby people can be more choosy about which jobs they choose to take.

So if the CI is too small it's of no monetary benefit to households but it does help employers get cheap employees. If the CI is too big it's great for households but makes life harder for employers because employees can say no unless the employer makes it worth their while.

However there will be a "sweet spot" where it is just large enough to ensure full employment and that's what we should be aiming for, I guess.

Mark Wadsworth said...

D, I am sure there is a "sweet spot" which will be different for different people anyway, but the range can easily be guessed at somewhere between £50 and £150 a week for a UK adult (depends whether it includes housing costs or not_).

The Stigler said...


"How is Citizen's Income going to nudge the unemployed into godawful jobs for the experience of working and all that which you say is worthless anyway as any mug can do most jobs?"

Because people will see the fruits of their labour rather than seeing it taken away in benefit withdrawl.

And just because anyone can do a job doesn't mean that having experience in it is worthless. The people who have worked on a till have seen customers day-in-day-out and often have a far better insight into what they want than people who come in on graduate programmes. It's why McDonalds annually sends head office staff out to the stores to serve customers and flip burgers for a few days.

Bayard said...

"One of the effects of CI is going to be to act as a subsidy to employers. I think that our experience of previous CI-like systems like Speenhamland show that."

Derek, we still have the Speenhamland System, except now it's called "Working Families Tax Credits". However, the subsidy to employers from the WFTC is limited by the minimum wage. What it mostly means is that employers are employing more people working fewer hours, which has more of a beneficial effect on the unemployment stats than on employers.
The crucial difference between CI on the one hand and Unemployment Benefits and WFTC on the other is that the latter are means-tested and so act as either as a disincentive to earn more (WFTC) or to work at all (UB), and the former is not.
Also most of the costs of CI are already borne by the state in the form of unemployment benefits, WFTC or income tax and NI tax free amounts.

Kj said...

CI is not a speenhamland system, or the american equivalent of EITC, most importantly by the lack of a ceiling. I´m not sure if it can be said to subsidise employment, as you say Derek, it all depends on the size, but also lots of other factors. Also if you tax income of not, immigratio policy. Take for example the issue of transferrable tax credits/co-taxation of couples, which has been blamed of "keeping women out of the labour force", reducing supply, even at a relatively low level, that keeps wages up slightly doesn´t it? If the "middle class" is large enough, it seems to me that there would be a larger population of "doesn´t necessarily need to work" than the "the CI is so small that I definetly need to work"-crowd.

Derek said...

I didn't mean to suggest that CI was a Speenhamland system, Kj. I only meant to suggest that we can learn something about CI from our experience with the Speenhamland system.

Like LVT, CI would have a lot of effects on the economy, not all of them obvious, and it is important to try and foresee how they interact so that we don't get blindsided the way that the Danes did when the introduction of too low a rate of LVT indirectly caused an unexpected rise in the price of land as the economy improved, even though the expected effect of LVT was to reduce prices.

Derek said...

Hadn't thought of it like that, Bayard. But you're right. Speenhamland lives on!