So what did anyone think would happen?

Cinema workers celebrating victory in a campaign to adopt the London Living Wage were today hit by news that around a quarter of the workforce is now facing the sack.

Picturehouse Cinemas said that the cost of increasing basic wages at the Ritzy Cinema in Brixton to £8.80 an hour would be absorbed by reducing the number of staff by at least 20, with a redundancy programme starting next month.

Seems logical really.

118 thoughts on “So what did anyone think would happen?”

  1. It is so obvious. It seems they were told that the pie was not bigger so that higher wages would mean cuts and they go ahead?

    My conclusion
    The negotiators are looking for a battle not a solution. The employees are the cannon fodder and we take another step towards R. Brand’s glorious revolution. Or something like that.

  2. Jesus. This shows the problem with letting unions into your workforce. They start treating a job like a popcorn seller and ticket ripper as a job that you can raise a family and run a house on, rather than the sort of job that you get after school that gives you a few quid in your pocket to spend on fags and booze that isn’t a terrible start in life as at least it shows you can turn up and do a day’s work.

  3. By the way, I believe the same thing has happened or is happening with burger flippers in the States, who seem to want about $50 an hour to burger flip.

    What they currently earn ‘is not enough to raise a family on’ apparently, ignoring the fact that flipping burgers is not supposed to be the sort of job you raise a family on, otherwise burgers cannot be sold for $1.49 (or whatever).

    The left has a lot to answer for, not least persuading women that they could have and raise kids without the support of a man, but it never will.

  4. Interested,

    McDonalds in France has ordering kiosks, and they’re apparently starting to get them in the US. When you’re ordering a McD, it does the job as well as a person.

    I can’t help wondering if France’s labour laws are why they got them first.

  5. This is good news.

    It is such a simple case that people whose normal reaction is to blame employers for everything might, just, start to consider alternatives

  6. I saw a definition the other day of “liberal (n.) – one who believes that increasing the price of things reduces consumption when talking about fuel but that increasing the cost of things doesn’t decrease consumption when talking about minimum wage”

  7. @The Stig, I suspect the kiosks do the job far better than a person. I can’t remember the last time a burger chain actually gave me what I ordered from the illiterate mouth-breather on the counter. I’ve stopped bothering to moan and just eat what I get given.

  8. This cinema is local to me – it’s a rather nice, middle class, hipster hangout. There’s another branch of the same chain a few miles away in Clapham – but they seem to have let this crusade pass them by.

    The local SWP, Wolfie Smith types were sometimes to be seen with their banners and pasting up table full of leaflets. Is there nothing these people touch that doesn’t go wrong?

  9. From the ES:

    Two management posts will be axed along with eight supervisors, three technical staff and other front-of-house workers from its workforce of 93.

    93???!!! for an art house cinema that seems to be a single cinema. What are they all doing? Does anyone know the Ritzy? I would have guessed maybe max 20 employees.

  10. “Does anyone know the Ritzy? I would have guessed maybe max 20 employees.”

    There’s a restaurant and a couple of bars as well.

  11. BiG,

    I’d say it’s as good. They can still screw up collecting the order from the machine (and did in a McDonalds in France I went in).

    But the selecting and placing order bit is fine.

    It also has some internet stuff, too. So, you can order at home on your browser, then turn up with your phone, enter a code, and stick your credit card in and it tells the kitchen to start making it.

  12. “BECTU, the union that represents cinema staff, today described the move which follows a year of strikes and negotiations as a “kick in the teeth”.

    The union is now preparing to ballot its workers on a further round of strikes at the popular arthouse cinema. ”

    So now they’re going to destroy all the jobs by going on strike.

    As its an art house let the arty types pay for it buy putting prices. Maybe they could triple prices and create more jobs, I’m sure the Guardianitas will flock there to do their bit once they know its creating jobs.

  13. bloke (not) in spain

    Shame about the French ordering kiosks. McDonalds, France seems to be only McDonalds chain doesn’t employ mouthbreathers & instead employs staff who take an efficient pride in giving good service. And they all speak the language of the country, so you don’t need Urdu or Russian phrasebooks to get a cheeseburger.

  14. By replacing more expensive labour with machines, this French McDonalds episode will also allow the Guardian to smugly preach that the French are more productive per head than the UK, but won’t tell you the bit about the least productive 10% shut out of the workforce.

  15. BwaB

    It would be an investment. NW3 should consider it a duty to flock there and pay £30 to see “Social Workers Fight the Cuts 7” dubbed in French.

  16. Seems logical? – in purely reductionist terms yes but clearly there is more going on here. They are clearing out a fifth of the jobs just because they have to pay £8.80 an hour? Really?

  17. John – what were they paid already? It’s only a 35% rise if they were all on minimum wage and since some of the posts that are going are “managers” that seems unlikely.

  18. @Tobin Pigou

    ‘Seems logical? – in purely reductionist terms yes but clearly there is more going on here. They are clearing out a fifth of the jobs just because they have to pay £8.80 an hour? Really?’

    What do you think is going on, then? The cinema was previously employing too many people and is just using this as cover to make redundant those it was otherwise too scared to make redundant? Sounds plausible, in a ‘the words together do make a sentence’ sort of way.

  19. ‘John – what were they paid already? It’s only a 35% rise if they were all on minimum wage and since some of the posts that are going are “managers” that seems unlikely.’

    I’d hazard a guess that some of the poor managers have lost their jobs as a sop to those who purport to support the ‘workers’.

  20. I have no idea what they were on; it doesn’t say. However, when they brought in the minimum wage (and subsequent increases) at the company where I worked, every step on the pay scale was increased.

    If someone had worked there for ages, was in a more senior role than the min wage staff and was on £8.80/hour then they would expect a pay rise too.

  21. I have no idea whether the cinema is under/over staffed. But let’s assume for argument that it’s over-staffed: in that case what might be happening is just as you suggest and the owners are just using the living wage announcement as a smoke screen. On the other hand they might have worked out that they go out of business without the redundancies. I don’t know but it’s a ridiculous over-simplification to say that a rise in wages of x% inevitably leads to job losses of y%.

  22. From other sources, we learn that the old Ritzy wage was £7.24. Assuming everyone was paid the same, we have 93 employees, a mix of full-time and part-time workers. Factoring in employers’ NI, the weekly payroll bill comes to just shy of £25,000.

    Maintaining a constant wage bill, and keeping the same ratio of FT to PT workers, they can only afford to keep 75 workers. Playing around with the full-time / part-time ratio gets you to 73 fairly easily. Don’t forget that NI is progressive: it’s proportionally higher for those working more hours or on higher wages. If they shed more PT workers then they end up having to pay more NI.

    Excel spreadsheet available on request (this is how I spend my lunch hours…).

  23. Tobin,

    “They are clearing out a fifth of the jobs just because they have to pay £8.80 an hour? Really?”

    According to “Brixton Buzz”: “the workers have revealed that the company intends to axe the positions of 2 managers, all 8 supervisors, 3 technical staff, plus numerous Front Of House and Bar staff.”

    Eight supervisors? What the hell? My local 7 screen multiplex has around a dozen staff doing ticket sales, concessions and sorting out tickets and from what I can tell, one manager making sure they’re doing their job. Yes, there’s things you don’t see like projectionists and cleaning, but the projectionist’s job is little more than standing by a machine.

  24. I dunno… In my experience labour costs are a huge proportion of the turnover of most companies. A 20% increase in labour costs could easily wipe out all profit and then some as I understand it.

  25. Interesting comments but I’d say:

    • we’re guessing about their staffing levels and roles.
    • wage change might have some effect but none of us has the business plan projections or understands what their real elasticity of demand for labour is.
    • management might be sneaky.

  26. Dan – Fewer higher-paying jobs? That sounds like a productivity increase in the business (like the fast-food robots in other posts). Different story from the living wage driving job losses.

  27. Didn’t say “fewer higher-paying jobs”. Said: “Fewer people with more highly paid jobs”. Meaning fewer people working but those fewer people have higher salaries, as seems to make sense given the context.

  28. @Tobin

    ‘I don’t know but it’s a ridiculous over-simplification to say that a rise in wages of x% inevitably leads to job losses of y%.’

    I don’t think anyone said it was ‘inevitable’ or specified the X and Y in your comment; other than that, it seems to be what has actually happened in the real world?

    My suggestion that they were hiding behind this to bring in necessary redundancies was a joke! If redundancies are necessary, they are necessary, you don’t hide them by paying the remaining staff more!

  29. John, Dan – as the link says fewer, higher paying jobs. So if they have the same number of bums on seats (assuming no additional showings) then it’s a productivity increase with associated job losses and a better paid remaining workforce. In most contexts that is thought of as progress. It’s not a living wage story.

  30. They may not be ‘overstaffed’ now, but will be once their labour costs have gone up by 15% (or whatever it is). Getting rid of two managers makes sense if there are fewer people to manage.

    Why the conspiracy theory about waiting for the pay rise and then laying people off? Why not the far simpler and obvious reason that a large increase in labour costs means they cannot afford to employ as many people?

    Basic economics applies even to avant guard cinemas in Brixton .

  31. Interested – I know you meant it as a joke, but I don’t see it as a joke necessarily. I’ve seen it happen often in businesses I work in. And “seems to be what actually happened” is begging the question. Simple fact is that no one commenting here knows what actually happened in this case. Minimum wages can reduce employment but don’t always. That was why I was saying that the original post is reductionist.

  32. @Tobin

    ‘And “seems to be what actually happened” is begging the question. Simple fact is that no one commenting here knows what actually happened in this case.’

    Are you saying the owners are lying? Because that *would* seem to be applying your own filter to the affair? From the original news story:

    Picturehouse Cinemas said that the cost of increasing basic wages at the Ritzy Cinema in Brixton to £8.80 an hour would be absorbed by reducing the number of staff…

    A Picturehouse spokesman said…’During the negotiation process it was discussed that the amount of income available to distribute to staff would not be increasing, and that the consequence of such levels of increase to pay rates would be fewer people with more highly paid jobs.”

  33. Interested – No. I’m saying that they might be lying, or perhaps just bending the truth a little and getting through some job losses that they’d have liked to do anyway but don’t need to do solely because of a wage increase. I don’t know and neither do you. Which I guess makes me a terrible old cynic.

  34. Interested – But a fair point about my bias/filter. Although I’d prefer to look at it as trying to make the Overton window a little wider by keeping an alternative (feasible) possibility in view.

  35. You said: ‘Simple fact is that no one commenting here knows what actually happened in this case.’

    Ah sorry. I had thought you were in the business of questioning others for commenting while lacking facts.

  36. Lol at Tobin Pigou. What’s your point?

    If a company is suddenly required to pay their staff more per hour and the wage bill can’t increase, then they need to reduce the number of staff. Remaining staff will need to be more productive, which will probably be achieved by getting rid of the most shitty staff doing the lowest return jobs.

    It is desirable to do more marginal things and to employ more people doing these things when you are able to pay them less per hour worked.

  37. Tomsmith – I was making a simple point in a discussion with some people who seem to be able to engage in a civil discourse without using text-speak. Sorry if it went over your head. Agreed in your over-simplified fixed budget, fixed salary example I would have to reduce the amount of labour I buy. So what? What relation does that have to real life? I’m assuming that you’re not involved in a real business because you seem to think that people set wages according to marginal product. That’s something that only ever happens in undergraduate textbooks.

  38. Tobin, if I understand correctly, you’re suggesting that they fired more people than necessary “pour encourager les autres”? (Or rather décourager in this instance.) There’s some logic to this: Picturehouse is owned by Cineworld, and while they could absorb the costs of higher wages in one cinema, they almost certainly couldn’t across their entire estate.

    But does firing 20 staff, rather than 10 or 15, make much difference to the encouragement effect? I suggest that it does not. In planning this action, their list of priorities must be:
    1: Cut costs;
    2: Don’t annoy the customers by having too few staff;
    3: try to discourage other protests;
    with #3 being very much a distant priority.

    Besides, with just 20 sackings the statistics are well within any p-value or margin of error that you care to apply.

  39. Andrew M – No I was suggesting that they may have fired exactly as many as they wanted but that that may have been more people than was necessary solely because of the increase in wages. Admiral Byng can rest easy.

  40. Tobin,

    “Agreed in your over-simplified fixed budget, fixed salary example I would have to reduce the amount of labour I buy. So what? What relation does that have to real life? I’m assuming that you’re not involved in a real business because you seem to think that people set wages according to marginal product. That’s something that only ever happens in undergraduate textbooks.”

    Good point. Companies don’t pay based on what money is available, they pay based on what they need.

    Looking at what people have gone, and the change of general manager my guess is that they’ve worked out that they can strip out a layer of management – get rid of the popcorn supervisor and just have the popcorn seller dealing with the manager, having more responsibilities, but the quid pro quo is that they earn more money.

  41. Christ. If anyone ever doubted that the Minimum Wage was a religion, they shouldn’t after reading Tobin Pigou’s intellectual contortionism.

  42. Richard – I don’t take a religious view on minimum wage. Clearly it has an effect on employment at the margins but often not a very large effect. Have you read the Card & Kreuger paper that looked at the effect of minimum wage changes from state to state in the US on fast-food joint employment? There’s lots of empirical work on minimum wage but that paper is a classic. You wonder about my contortions? I wonder about the people who want simple reductionist answers to every situation.

  43. BraveFart,

    > 93???!!! for an art house cinema that seems to be a single cinema. What are they all doing? Does anyone know the Ritzy? I would have guessed maybe max 20 employees.

    At any one time or all together? Cinemas are open seven days a week for about thirteen hours a day, at unsociable hours that attract part-time workers. I’d multiply your 20 by 3 for a start, to get a rough idea of the number of fulltimers required per week. Split some of those FT shifts across 2 PTs, and 93 seems about right.

  44. Be interesting to see if Chuka Umunna sticks his oar in – I think I’m right in saying that he’s the MP.

  45. The Card-Krueger study is often cited in discussions on the minimum wage. The study induced further studies into the effects of the minimum wage, and had a dramatic effect on the US government’s policies at the time.

    The study itself was conducted by telephone surveys of fast-food restaurants in New Jersey and Pennsylvania. The differences-of-differences calculation revealed the state that raised its minimum wage had an increase in employment at local fast-food restaurants.

    There were anomalies in their data: a Wendy’s supposedly had no full-time employees prior to the minimum wage increase, and then 35 afterwards. David Neumark and William Wascher re-evaluated the Card-Krueger study using actual payroll records at the same restaurants, and concluded: “In contrast, a simple replication of CK’s differences-in-differences estimation using the payroll data indicates that the New Jersey minimum-wage increases led to a 3.9-percent to 4.0-percent decrease in fast-food employment in New Jersey relative to the Pennsylvania control group.” http://www.nber.org/papers/w5224

    The same authors also performed a meta-analysis on the recent economic research into minimum wage effects, concluding: “First, we see very few – if any – studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.”
    http://www.nber.org/papers/w12663

  46. The relevent point I glean from the above comments is that this place was playing the Guardian advisory game.

    Massively overstaffed, paying more than the minimum wage.

    But, on the basis that someone of the left always thinks you are not far enough to the left for their tastes, they had to screw it up.

    Well, we’ve had whole nations show what a weapons grade clusterfuck socialism is and now we have a Guardianista rulebook weapons grade clusterfuck. Where next? (Or Quo Vadis, as they would probably say).

  47. Anthony Masters – Those were criticisms of the original 1994 K&C paper. K&C did later work that found similar lack of impact. The point is that, in general, people don’t find huge effects one way or the other.

  48. If you reduce the staff by 20%, then you logically deliver about 20% less service to the public (unless you think 80 people can do the work of 100 with no reduction in quality, in which case they were grossly overstaffed), which means you get 20% less money through the till with which to pay the staff, at the higher wage.

    Or to put it another way, different people can do work of differing economic value, and those who deliver more than they are paid are worth keeping, and those who don’t have to go. Some of those who went will be people worth a number between what they were paid before and what they have to be paid now, and some will be those who supervised or supported those particular jobs. That could be any percentage of staff – there’s no constraint. If 99 staff were worth £7.30/hr and one was worth £8.90/hr, then you would have to get rid of 99% of them. It’s not proportional.

  49. Any government worth its salt will set a minimum wage low enough that the employment effects are barely detectable. I assume we are all agreed that a minimum wage of €50 an hour would have massive effects on employment?

    That being the case, the minimum wage is rather moot. It brings a handful of people up (I think ~2% of the workforce in the USA), probably increases the wages of a few people over it because MW jobs genuinely aren’t all the same, in the Adam Smith sense, and kicks a few people (but it’s usually hard to say who exactly) out of work. So, at a low enough level, it isn’t worth the ideological argument on either side. It’s just there for left-inclined parties to posture about.

  50. @ Tobin Pigou
    “The point is that, in general, people don’t find huge effects one way or the other.”
    Are they actually looking for them?
    British textile industry. Over 90% of the workers that were there in 1997 have lost their jobs.
    Does “huge” mean over 100%?

  51. ” in which case they were grossly overstaffed”

    They might well have been, because it’s quite a British thing to do, but they might well have settled at equilibrium (the cinema earned enough to keep that steady state) until some idiot destabilised it, with exactly the results we see now: people will indeed be paid more but they’ll have to hustle that much more to earn it, and the whole place will clearly be less sociable for employees. They’ve been BECTU’d!

  52. I forgot to add that it’s unlikely that BECTU’s own union officers will be working at that cinema or any other; more likely they are maintained by the union dues that will be taken from the increased pay.

  53. “it’s unlikely that BECTU’s own union officers will be working at that cinema”

    Ah. Several I’ve looked up so far seem to be … BBC. Nice.

  54. So Much for Subtlety

    NiV – “If you reduce the staff by 20%, then you logically deliver about 20% less service to the public (unless you think 80 people can do the work of 100 with no reduction in quality, in which case they were grossly overstaffed), which means you get 20% less money through the till with which to pay the staff, at the higher wage.”

    I am not sure that is logical. If you cut out a chunk of middle management and manage instead by relying much more on IT, service won’t go down. Which is what a lot of people have been doing – computers keep a track of sales and inventory and so workers don’t need a manager standing over them all the time to get the same data. You can cut out the least effective and least important services. I am old enough to remember when a pretty girl with a flashlight walked you to your seats. Long gone. Especially as some of those services were not really services.

    As it is an ArtHouse Cinema I expect that a number of the fey young boys and girls with tattoos previously employed were kept on at the whim of management – presumably in the off chance of the odd shag. There probably was no economic explanation.

    Myself, I think they have missed a trick. They should have paid the increased wages. But doubled ticket prices. And stamped them all, and put big posters in all their windows, saying that they are a Fair Wage cinema. Tickets costs more but make you feel all warm inside. I mean, it is an Art House cinema. Their customers are dying to pay a lot more to feel good about themselves, right?

  55. As mentioned above, all this will do is drive increased automation. There are several restaurants (real restaurants, cheapish and cheerful but not fast food) where I live going with iPad menus on the table. You pick and choose what you want to order and submit to the kitchen. Especially popular with Chinese places – nice tempting photos of the dishes on the iPad! What about public transport, card based swipe in/out travel. I can think of lots of stuff you could automate in a cinema. Even serving popcorn.

    There’s a capex cost to anything like this, but if you increase the labour cost tipping the point where it becomes a worthwhile investment is not that hard.

  56. Why the conspiracy theory about waiting for the pay rise and then laying people off?

    Because the left always have to find someone else to blame for their mistakes. Anyone who understands maths can see that, if wages rise, the number of employees will fall, or they’ll be expected to work harder to justify the increased wages. When that inevitably happens, the left then have to find a way to pretend it wasn’t just as predictable as we told them beforehand.

    EVIL CAPITALIST CONSPIRACY! is always a handy explanation.

  57. @john77 – Textile/garment industry at the low end was done in by trade. Low wage work at a cinema is not easily traded unless the cinema is very close to a land border with a low wage state and you don’t limit movement of workers. Getting back to reality a lowish minimum wage like we have in the UK does not seem to have had a large effect on employment in general.

  58. This does seem to be evidence that the minimum wage in the UK is doing what is is supposed to.

    Remember, the Low Pay Commission is tasked with setting a minimum wage “without any significant adverse impact on employment”.

    It was the move to the “Living Wage” that appears to have tipped the balance and cost these people their jobs.

  59. @Tobin

    ‘Getting back to reality a lowish minimum wage like we have in the UK does not seem to have had a large effect on employment in general.’

    This cinema kerfuffle is not about the minimum wage.

  60. Tobin Pigou:

    “I was making a simple point in a discussion with some people who seem to be able to engage in a civil discourse without using text-speak”

    I don’t think there’s anything uncivil about lol-ing. I genuinely laughed reading your contortions and wanted to communicate how I felt. I find you funny.

    “Agreed in your over-simplified fixed budget, fixed salary example I would have to reduce the amount of labour I buy. So what? What relation does that have to real life? I’m assuming that you’re not involved in a real business ”

    My experience is in a business employing around 1000 people on the minimum wage or slightly above. It is one of genuine worry any time minimum wage looks like being raised. We would prefer to be paying people quite a bit below minimum wage. So far we have coped by employing fewer people and by driving productivity in a variety of ways while targeting higher prices.

    We know the price we are likely to receive for our product, how much we are likely to produce in any given year, what we can afford to pay our work force, and the maximum production we are likely to be able to get out of them. If we had to employ at the living wage the business would not be viable in its current form.

    What’s your experience?

  61. @ Tobin Pigou
    You seem to be unaware that supply and demand affect cinemas. The British Textile industry was done in by Blair’s minimum wage. Textile trade has been going on for millennia – it didn’t start in 1998.
    In the late-80s and early-90s British-made textiles were more expensive than imports from China but at the top end they competed on superior quality and a lot at the cheap end could compete on prompt delivery for stores that wanted extra product of a good-selling line in a hurry. Once the NMW came in the cost differential was just too great and M&S abandoned its “Buy British” policy as it would have so massively uncompetitive against Next etc.
    If you were genuinely ignorant your comment would be less irritating but you profess to know what you are talking about.

  62. Tobin,

    “Low wage work at a cinema is not easily traded unless the cinema is very close to a land border with a low wage state and you don’t limit movement of workers. ”

    That assumes that people must go to see films and must go to the cinema. You’re missing things like people going and seeing films on DVD/streaming or people choosing other forms of entertainment.

  63. Must be 5 years or more since last purchased tickets at cinema – buy them online and collect from machine in foyer. Then buy drinks/snacks and hand ticket to the guy collecting them near the screen entrance and thats it – contact with just 2 people.
    Can’t think why they have 93 staff when a multi screen cinema near me manages on under 50. Overstaffed?

  64. I do have to wonder – if industrial action is taken will 93 jobs go rather than just 20? If I want to take wife to the cinema and one is shut or poor service due to industrial action I’ll take her to another cinema instead, not like there’s no choice.

  65. @ Tomsmith Sorry about objecting to your LOLing. I work for a business services firm. We employ no one on anything as low as the minimum wage. We even pay our cleaners the London living wage. We have some outsourcing, both in the EU and outside it but we pay well above local minimum wages there too. So, looks like you genuinely are in a fixed cost, fixed revenue world and minimum wage changes comes straight through to the bottom line. Genuinely, good luck with that, it must be an absolute bugger.

  66. @john77 – I’m sure that NMW had an effect at the bottom end when it was introduced. The only problem with your theory that the UK industry collapsed because of NMW is that textile industry output has been in long-term decline since the early 70s:

    http://www.ons.gov.uk/ons/rel/uncategorised/summary/changing-shape-of-uk-manufacturing—textiles/sty—textile-industry-average-wage-lowest-within-uk-manufacturing.html

    I think that the decline is more to do with long-term trade & productivity rather than NMW.

  67. Interested
    October 29, 2014 at 10:58 am

    @Tobin

    ‘Getting back to reality a lowish minimum wage like we have in the UK does not seem to have had a large effect on employment in general.’

    This cinema kerfuffle is not about the minimum wage.

    To a point, Lord Copper. There is a big move on the left to have the Living Wage set as the new NMW.

  68. Tobin Pigou:

    Thanks.

    Costs and revenues are not fixed, we just have a lot less margin to work with than you obviously do. Labour is our main cost and so fixing the price per unit means we have to cut worker numbers and become more efficient to maintain the same level of output. We have done this via mechanisation and cracking the whip harder, but there is only so far we can go with this. We are in the process of slightly altering what we produce in order to target higher prices, but competitors are doing this too. The main worry is government intervening again to increase still further the price we have to pay for labour.

    A living wage is insanity in this respect. We would need to remodel the business and drastically change what we produce. This would probably entail the loss of 70 to 90% of the workforce.

    I’m just puzzled why you would make such effort to dismiss the experience of others when you are so clearly not impacted by the minimum wage at all? Your cleaners are being paid the same wage that our supervisors of 30 people are getting. I think probably my business is closer to cinemas (maybe not the arthouse variety) and textile production than yours is.

    You sound a bit like the middle class people who support a minimum alcohol price that will impact the cooking lager drinker but not the £25 bottle of wine crew. Of course they wouldn’t support a £10 per unit minimum alcohol price just as you would not support a £100 per hour minimum wage.

  69. @ Tobin pigou
    “long term decline” is not the same as falling off a cliff.
    In 24 years from its peak in 1973 to 1997 just before the NMW the industry’s output by value declined just under 35%. In the next 7 years it declined just over 41%. You must be able to see that from site that *you* choose to reference.
    There was little impact at the top end (Savile Row, made-to-measure wedding dresses, etc) – employment at the bottom end collapsed because Blair and co passed a law saying that firms could not sack workers who earned less than the NMW just because they got paid more than they earned. So, instead, the firms went bankrupt and everyone lost their jobs. That is why productivity increased 37% – you didn’t suddenly get Saville Row tailors rushing the job or brides saying that they didn’t need a fitting – no! low-paid jobs disappeared and average pay went up by one-third.
    If I thought that you would actually read it and/or I had half-an-hour to spare I could trace the academic paper describing employment in the textile industry. But since you ignore the data in the site that you choose to reference, why should I bother?

  70. @john77 I referenced the ONS. If you’ve got an alternative more reliable source then I’m all ears. Are you suggesting that without NMW that textile employment wouldn’t have bottomed out roughly where it did and we’d still have people making £1.50 t-shirts for Primark?

  71. @ The Stigler
    There is an art cinema a bit less than an hour’s drive away and we’ve been a few times. I’m not a great film-goer (once when I was young bachelor I had an unscheduled free evening so I thought I might walk over to the cinema where I had last seen a film and when I got there found it had closed down in the meantime) but has interesting films. It is mostly run by volunteers because it cannot operate with the small audiences for its special-interest films (but to compensate it has comfortable chairs with tables for coffee-cups or wine-glasses instead of rows of seats crammed together) and simultaneously pay NMW to the necessary minimum number of workers to keep it going. I see that as the future shape of art-house cinema.

  72. @tomsmith – I guess I’m as hypocritical as everyone else. I don’t have a strong view on the appropriate level of minimum wage. And I don’t dismiss your actual experience. It’s just that across the economy as a whole it doesn’t have a big effect. (And even if it was responsible for closing down the low GVA end of the textile industry (which I doubt) you have to balance that against the good it does for others and then make your mind up in the round). So my objection is that Tim’s original post puts forward a specific example (of a very large cinema group with 80% of its staff on zero-hours contracts) to prove a general case. He’s got a blog to run and needs to generate traffic so that’s fine for him but I also think it’s ok for me to point out that there might be more nuance.

  73. @ tobin pigou
    I am not just suggesting I am *stating* that without NMW we’ld still have people in England making clothes for M&S and people in Scotland making mohair garments for Dawson.
    We probably should not even have Primark; I’d get my T-shirts from 10k races instead. [Actually I have never bought myself clothes from Primark because they don’t fit – Primark don’t seem to believe in waistlines for men or leg muscles]

  74. @Tobin,

    I think we’re in agreement in that the current low MW does not have a big effect across the whole economy. But that is the typical protestation of the above-median person who thinks that it’s not a problem that real people at the bottom are losing out because – look! the median hasn’t changed! So life is fine! The broad view ignores individuals.

  75. @ Tobin pigou
    I said it would take half-an-hour but one reference took me back to where *your* choice of ONS site says
    “employee jobs fell by 90.1%, from 851,000 to 85,000”
    OK, that is from 1979 but it is including shoes and leather workers and Clark’s, being a family firm, has managed to keep going. Excluding Clark’s the fall in textiles is far steeper.
    Did you actually read the ONS site?

  76. Tobin Pigou:

    “I don’t have a strong view on the appropriate level of minimum wage.”

    I thought your view was that it should be set at a level where it impacts businesses like mine but not businesses like yours?

    “And I don’t dismiss your actual experience. It’s just that across the economy as a whole it doesn’t have a big effect.”

    This is dismissing my experience. It does have a potentially catastrophic effect on me and frankly this is what I care about.

    “you have to balance that against the good it does for others and then make your mind up in the round).”

    Are you claiming that fixing prices can be beneficial to more people than it hurts, taking the economy as a whole?

  77. @john77 – I did read it. Lots of firms kept going. You could have picked the quality shoe firms in Northampton and nearby. You could have picked Abraham Moon. You could have picked Fox cloth as well. (Few of them is mass-market). Others failed. That’s a pity for each individual but in general productivity gains in the economy come from new firms replacing old ones. I think that the fall of low value-add employment was because of international trade and was going to happen sooner or later. Maybe NMW accelerated that, maybe not. But I don’t think it would have changed the big picture the clean out of the bottom end of textiles was going to happen, like it had happened much earlier in manufacturing and like it is happening now in middle market jobs in the service sector. You think it was all because of NMW. You might be right, I don’t think so, but you might be.

  78. @tomsmith – Certainly not suggesting a big rise in NMW. We’ve got school leavers with a couple of A-levels on £20k so if that was NMW tomorrow the whole country would be screwed. I am saying that your/my experience is not relevant. NMW question needs to be looked at across the whole economy and none of the parties with people likely to be PM next year is looking to get rid of it.

    @Bloke in Germany – You have to take the broad view on policy. I think NMW is a side-show though and the thing we really have to solve is moving a stagnant median wage up.

  79. “Certainly not suggesting a big rise in NMW. We’ve got school leavers with a couple of A-levels on £20k so if that was NMW tomorrow the whole country would be screwed.”

    But you’re happy with a little rise that would screw me, yes?

    Why?

    Why not just leave prices to the market in all cases? Sounds like utter hypocrisy on your part.

  80. I mean someone operating in a area of business where average wages were another step above yours might wonder what the point of (whateveryoudo) is and support the minimum wage being raised above that level, effectively ending your business overnight.

    What makes them wrong at that minimum wage level but you right at the current minimum wage level?

  81. “we really have to solve moving a stagnant median wage up.”

    Unless you are suggesting government doing less, we don’t have to solve anything of the sort. You can’t regulate median wage upwards any more than you can grow money on trees or make people richer by printing more of it.

  82. @ Tobin Pigou
    I get fed up too quickly with Google pointing me to adverts so instead of the Nottingham University paper (which, yes, might know more about it than ONS) I’ll refer to the Warwick University study http://www2.warwick.ac.uk/fac/soc/ier/ngrf/lmifuturetrends/sectorscovered/clothing/sectorinfo/output/ which shows ten years with annual decline of more than 10% per annum with another five years of slower decline after that. That includes footwear so only shows an 80% decline, thanks to Clark’s (and Doc Marten’s) – textiles was 90%.
    You are being specious by quoting shoe companies in a discussion about textiles: your ONS reference talks about “textiles and leather goods” Quote from wikipedia “A textile or cloth is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn.” Leather is not a textile. No reasonable shoes are made of textiles. Socks are textiles.
    I do not need the aggro of dealing with someone who knows just enough to be able to misquote.

  83. @john77 – Textiles, leather, unobtanium, whatever. Long-term the low-value jobs in traded goods will go to where the factors of production are cheap. That’s life. And although NMW might accelerate that in some sectors at sometimes,those jobs would not have been staying even if we didn’t have NMW.

  84. @tomsmith – No. I hope that you stay in business and I hope you stay in business when real wages start to rise properly.

    And the “we” is all of us. I don’t care who does it.

  85. @Tomsmith – Why keep it? One, fairly brutal, answer is that as we have top-up in-work benefits, letting a business pay very low wages pushes the cost of the benefits out onto other businesses/individual taxpayers who are then subsidising low value-add work. So to prevent that free-rider problem we have a minimum wage. Or we could abolish the benefits too.

  86. Ok so the obvious answer is remove the top up benefits. Then people could work more than one job or not as they see fit.
    If people are short enough for money they used to find a way to get the money.
    I remember my mum having 2 jobs for many years, my missus had between 2 and 5 jobs for about 25 years.

    Don’t forget all those company directors and self employed people – NMW doesn’t apply and they may have multiple jobs themselves!

  87. @Martin Davies – That’s one answer. Not sure that Tomsmith would be too pleased though as he might not be able to crack the whip if the staff could choose to stay at home and collect out-of-work benefits instead. So we’ll have to abolish those too. Up for it?

  88. @ Tobin Pigou
    Why should I talk to someone who refuses to listen?
    “although NMW might accelerate that in some sectors at sometimes,those jobs would not have been staying even if we didn’t have NMW.” is a LIE as I have previously stated and demonstrated.
    Speed of response has a value. If you do not have a blouse in store you cannot sell it. So some firm that can quickly supply blouses that Next is selling faster than expected had a business model until Blair introduced the NMW. If you are not a moron, you can understand that. If you are not a troll, you can accept that.
    Which are you?

  89. @john77 – maybe I’m a sort of troll-moron hybrid.

    One question for you. Is your position that you have demonstrated that without NMW the graph in the ONS report would have been flat from 1998 onwards (ie implying that most of those jobs stay without minimum wage)?

  90. @john77 – sorry, a second question, which I should have asked in the last post so perhaps more moron than troll. Hey ho! Anyway, here’s the second question: as you’ve established that the introduction of NMW in April 1999, but with prior notice, was so toxic then why did it take five years for output to reduce down to the sort of steady state we see now?

  91. More moron than troll if you don’t understand that there are time lags between economic causes and effects, such as contracts that bind buyers and sellers into deals that last for months or years.
    Using *your* reference %age falls go 10.4%, 7.5%. 2.8% (odd), 12.7%, 6.0%; Using Warwick we get 5 years at a fall of 11% pa followed by a second 5 years falling by 10.4% pa. Quite reasonable.

  92. @ Tobin Pigou
    I missed saying WTF?
    The second five years showed a fall of 10.4% pa. In which universe is that a steady state?

  93. @ Tobin Pigou
    I missed your “Is your position that you have demonstrated that without NMW the graph in the ONS report would have been flat from 1998 onwards (ie implying that most of those jobs stay without minimum wage)?”
    I cannot answer that because your question is self-contradictory.
    My position is that if Blair had not introduced a minimum wage and the blanket ban on sacking then most of the jobs would have stayed. That is not quite the same as saying the graph would be flat. There is a difference (which you seem unable to recognise) between a gradual decline and falling off a cliff.

  94. @john77 – the steady state towards the right side of the graph where the slope is flatter and we’re left with the higher value part of the industry. So, I think where you are is that M&S or whoever cancelled the big contracts when NMW came in in 1999 but the industry thought they would just carry on with a managed rate of decline in output over a five-year period. That’s some time lag. Were they hopeful of replacement orders? Or perhaps they hadn’t appreciated what a toxic effect NMW was having?

  95. @john77 – and according to this from Nottingham:

    http://www.nottingham.ac.uk/business/ICCSR/research.php?action=download&id=54

    M&S abruptly terminated a lot of contracts with major suppliers at the end of 1999. So why the five-year slow decline?

    I’m sure that NMW had an effect but I’m curious about why you think it was so much greater for textiles than the similar changes that other industries faced when production moved abroad both before and after NMW. Have you got any sources on the NMW effect in textiles?

  96. @john77 – Or why don’t you look at this:

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/32155/11-p109-government-evidence-to-low-pay-commission-on-national-minimum-wage.pdf

    Table 3.2 shows the change in jobs, by low-paying industry, since 1999. Although it does come from those unreliable slackers at ONS though so maybe you don’t like that.

    Shows textiles being well and truly screwed. And, to a lesser degree, food processing and agriculture. So the tradable sectors all badly hit.

    On the other hand, the non-tradables like hospitality, social care and hairdressing have job growth over the period. Even though they also have minimum wage and a “blanket ban on sackings” (which law was that by the way?).

    So maybe globalisation has had some effect on textiles too? Or have you got a source showing it was all minimum wage? Perhaps you could show that the excess bad news for textiles over food processing in Table 3.2 was due to something particular about the textile industry?

    I’m googling this stuff in a coffee break by the way so a textile industry expert like yourself must have some really good evidence to hand.

    TP

  97. @ Tobin Pigou
    Not a moron – a blatant troll.
    Textile decline by less than 1% pa before NMW, more than 10% pa after NMW.
    Only a lying troll will say that it is part of a “continuing decline”

  98. john77,

    “It is mostly run by volunteers because it cannot operate with the small audiences for its special-interest films (but to compensate it has comfortable chairs with tables for coffee-cups or wine-glasses instead of rows of seats crammed together) and simultaneously pay NMW to the necessary minimum number of workers to keep it going. I see that as the future shape of art-house cinema.”

    Very few people want arthouse cinema. It’s one of those stated/revealed preference things. So concentrating a few people into a weekly club makes a lot of sense. Plus, putting a on a screening is pretty simple today compared to the past using a projector and a blu-ray source.

  99. “So to prevent that free-rider problem we have a minimum wage. Or we could abolish the benefits too.”

    Yes of course abolish in work benefits and as many other incentive distorting benefits as possible.

  100. Do you have any reasons that don’t entail everyone being hostage to a chain of increasingly convoluted benefit payments?

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