Friday 3 September 2010

Job creation myth.

Supermarkets are facing calls to stop using misleading claims for jobs creation. Often a supermarket will claim 'hundreds of local jobs' will be created in order to boost local communities to back planning proposals.

The National Retail Planning forum has estimated a net loss of 276 jobs when a supermarket moves into an area.. not the 236 gained that supermarkets claim.

Really? A net loss? I very much doubt that. A 30,000 sq foot supermarket employs 200-300 people. The average local owner shop employs 2-5 people. To get a loss of 275 jobs after the supermarket creates 275 at 5/business closing, is over 100 stores closing. Or an entire Town. That can't be right.

A look into the report reveals that the NRP is at least under-egging the pudding by as much as the supermarkets are over-egging it. The headcount figure is the supermarket one, a 236 gain in jobs. What the report really says is that many of these jobs are part-time and the losses in the local community tended to be full time. The jobs created might be Saturday jobs but they are still jobs. The report has analysed data from over 12 years. That can only obscure the data, not help it. Employment patterns have changed dramatically since 1997 and the minimum wage and employment law changes. BQ remembers having 9 f/t and 2 p/t and 8 weekend staff at a certain store in 1995. In 2005 the same store had 3f/t and 3 p/t and 3 weekend. Upwards rates and rent pressure followed by upwards wage pressure meant smaller employment numbers. That was nothing to do with Supermarkets {actually it was, they started selling cheaper clothes than us.}

The report is championed by the
Association of Convenience Stores. Do you think they might be a tiny bit biased? Supermarkets surely damage local businesses. That is probably a given. But to say they actually reduce employment seems a pretty doubtful claim.


Anonymous said...

But if they put local stores out of business, as they do, then there will be genuine losses.

Steven_L said...

Investors are scared of supermarkets, I mean look how cheap 'Game plc' shares look at the moment.

I'm tempted, ever since CU told me Enterprise Inns is a dog, I'm broadening my search.

All the unemployed people I know do nothing but play computer games!

Laban said...

Our local Morrisons recruits dozens of part-timers, many of whom would love full-time work. They get daily shifts (on their working days) of 3-4 hrs a day, and generally about 15 hrs a week.

I believe the short shift pattern is because, after a certain number of hours, they're obliged to give the employees a break.

Marchamont said...

I get so fed-up of these silly "jobs created" statements.

The wonderful new Leeds Arena (it's not actually an arena it's a concert hall) will cost a cool £80m of public money, and is being ramped as creating 450 new jobs. Presumably 400 of these will be for construction.

Once it's finished it will boost Leeds' economy, no question of that, but will almost certainly bankrupt Sheffield Arena.

And even worse, once built it will be operated by the same firm that run the Manchester and Newcastle arenas. Talk about a stitch up.

Bill Quango MP said...

Anon: If a supermarket opens then local traders will suffer. No question. But to claim that Supermarkets REDUCE employment I can't believe. It would take every local retailer in a 100 shop town to recruit 3 p/t staff to equal a supermarkets job creation. That would never happen. A supermarket surely can't cause more job losses than it generates.
They may be part time jobs but then Primary school mums in the morning and college kids in the afternoon only want or can do part time.

Steven L. Game is one of those companies that you can actually predict a profits increase. Remember seeing Guitar Hero a few years back and thinking this will sell. Lips and those dance mat games before that and the Wii before that.
Xbox Kinetic in November may be a good profits booster. £150+ for the bundle I think. Starcraft 3 seems to have set some records too. Is that why the share price is rising?
I'd look at their coming soon to see what they have coming for December. If its Dead Rising 2 then that will sell.

Laban: Sort of. The pattern shift is to cover core hours. The busy times just after school drop off and lunchtime and after school/work.
Its actually 6 hour before a break needs to be given. This a disgrace.
Start at 10am and not even a glass of water until 4pm. Good employers allow a break but many don't.
Part-time is more about the contract. Most are 4 or 8 hour a week, or even zero, yet the employee often works far more. When the downturn comes they can be returned to core without penalty, or even let go without redundancy.

Marchamont: I think thats what this survey was trying to determine. Who can say what jobs are created vs what are lost.
Did you see the UK emissions report? It exposes a similar thing in our carbon claims. UK has reduced emissions by 16% 'hooray!'.
but it seems only because we have shut a further 16% of manufacturing and if the cost of Carbon footprint imports is included then our % actually shows an increase.
{I managed a store for a firm that had the sign "Largest store in Europe." When I asked the owner if it was true he said 'how should I know. But who's going to be bothered to disprove it?"

James S said...

I would not bet on Game, after porn the games industry will be first to fully embrace digital delivery.

Of course there is the 2nd hand market which is supposed to be a huge money spinner for all the highstreet stores...

Steven_L said...

Yeah! ... BUT ... What WOULD you bet on????????

BTW: Cheers BQ for the analysis, but I don't understand computer games, more a chess kinda guy :(

Tim Worstall said...

Ha, of course supermarkets reduce employment.

That's what we're actually after as well.

Jobs are a cost of doing something, not a benefit. So we want to reduce the amount of labour used to do any specific thing: this frees up labour to go and do other things.

Imagine, as an example, that these figures from the nef are correct (I know, using new economics foundation figures is crazed lunacy but bear with me).

£250,000 spent in a supermarket creates 1 job in the supermarket. £250,000 spent in small local shops creates 5 jobs in the local small shops.

So, should we prefer small shops or supermarkets?

Supermarkets of course. For that way we get our food and loo roll for our £250k large and there's also four people who can go off and wipe babies' bottoms, tend to the elderly or discover the cure for cancer.

So, we get both our groceries, smiling babies, attended to crinklies and maybe the cure will come before the fags kick in.

We're richer: we're richer because we have raised the productivity of labour and thus can have more things from the same amount of labour.

This is the story of civilisation folks, increasing the output we get from a specific input.

Now, run the whole story again with agriculture. Currently we employ about 1.5 % of the population growing all the food for everyone to eat. 300 years ago we employed 80% of the people to do the same thing.

So, we've freed up 78.5% of the population to go off and be opera singers, run the NHS, manufacture ships, run libraries, teach kinds to read, be outreach diversity advisors, and so on. You know, civilisation.

Of course we want to economise on our use of labour in any one task.

Anonymous said...

Excellent post Tim.

I recently watched an episode of Horizon from the 70s about the silicon chip, which was new at the time.

The programme is an amazing insight into how left-leaning the BBC was at the time, and how short sighted they were. Their whole attitude was that this new technology will make everyone redundant and that your children will live their whole lives without a job.

It seems ridiculous in hindsight. I for one wouldn't have a job WITHOUT the silicon chip. Whole industries have sprung up as a result of the technology and the labour that it has freed-up from mundane clerical tasks.

Bill Quango MP said...

Tim: Excellent. I've been reading about agriculture labour and production a lot recently. Its an amazing and almost unremarked figure. We all know about industry decline, yet agriculture declined and flourished at the same time.
{That was partly the supermarkets too.}

Except... £250,000 spent in a supermarket creates 1 job in the supermarket. £250,000 spent in small local shops creates 5 jobs in the local small shops.

An excellent observation.
However,without the supermarket there is no additional £250,000 spent.
An Asda opening in a small town will supply all those items not currently being sold, or a better variety of those that were.

The Supermarkets have reach. Pulling people from further out, to make a draw destination. This only happens otherwise with retail parks or solid established market towns, with strong retail presence.

A village can't grow an extra £1/2 million quid of business. A supermarket in an empty field can.

Tim Worstall said...

What industrial decline?

Manufacturing output in the UK is higher now than it was in 1945, 1960, 1980 and even 1990.

Manufacturing employment is down, sure, but output is up: it's just exactly the same thing, increasing labour productivity.

Oh, and by the way, this very point is the subject of the first chapter of my upcoming book which you can pre-order RIGHT NOW on Amazon.....


measured said...

What about the supermarkets making us, the customers, checkout our goods at self service tills? That's my unpaid time they are taking without a leave or a thankyou. Why do we stand for this? Well, we do stand and try to swipe fo which you need two hands, but it is to allow supermarkets not to employ someone and enhance their profits over the long term. However, it does not really save a person's time, as it just uses up my time. If the system was less awkward, I probably wouldn't resent it, but i reckon it could be argued that they are exploiting customers' short memories, removing their community role. Customers have the time for this as they are not fully employed and cannot buy the goods elsewhere.

Tim makes some very good points and of course he is right until we reach the stage where society starts to break down as so few are employed denying them the opportunity to spend their wages in their community. I don't want to sound socialist about this or undermine the need for specialisation and efficiency to assist development, but don't we reach a point where some unskilled jobs offer opportunities and benefits to those who have little else to look forward to apart from playing computer games? If unemployment rises, buy Game shares, particularly if a good game is out!

Anyway that's my penny's worth. I still favour talking to the girl at the checkout.

Sackerson said...

Tim is right. Let the poor starve. Useless mouths.

Mark Wadsworth said...

What TIm W says, obviously, but I'd also like to point out that rising house prices don't create jobs or increase efficient use of anything.

CityUnslicker said...

Tim - look forward to reading your book.

Still not sure I get the local employment thing - as BQ says, is more about swapping jobs rather than reducing employment massively - the output boost is incremental not seismic.

MW - You are beginning to sound like the anti-daily mail! ;o)

James Higham said...

To get a loss of 275 jobs after the supermarket creates 275 at 5/business closing, is over 100 stores closing. Or an entire Town. That can't be right.

It is with Walmart or ASDA.

Bill Quango MP said...

Measured: Alan Carr does a standup about a woman self-checking out a Plasma TV. "Put it through as Button Mushrooms!"
Tim..As Sackerson alludes, where are the new jobs? Or where are the hover robots so we can all just play tennis on the moon.

MW: The Anti-Mail!

H.: In the USA 63% of shoppers buy ALL of their goods from Wallmart.
When that happens, the whole town goes. At present that doesn't happen here, as even a Monster Tesco won't stock ALL the latest phones, every CD ever released, as many books of a Waterstones, have an own brand Starbucks and PC world / DFS/ Mothercare size stores attached...

But it will come. And the consequences will be the same as in the USA.