Be careful what you wish for on wages

Lidl is to pay that Living Wage to all its workers. This will undoubtedly lead to the insistence that if one supermarket can do it then all should. And that's the point at which people should be careful of what they wish for:

Lidl will be the first supermarket group to raise its minimum pay to the level set by the Living Wage Foundation in a boost for thousands of workers.

The German discounter said that from March it would pay all Lidl UK employees a minimum of £8.45 an hour in England, Scotland and Wales and £9.75 an hour in London. It claimed this would make them among the best-paid supermarket employees in Britain.

What Lidl wishes to do is of course entirely up to them. It's the coming insistence that if one then all which will be the problem. For there are different methods of retailing, ones that use more or less labour to perform the basic tasks. Lidl is at the low use of labour end of this spectrum - they are therefore able to, if they should so wish, to pay more for each hour of that labour. The same will not be true of other chains which use a more labour intensive retailing method.

The usual example here is in the US. Walmart famously pays quite low wages. Costco equally is famed for paying many dollars per hour more for the labour it uses. Campaigners regularly point to Costco and insist that Walmart must be able to pay those same wages, it's all retail after all, right?

The failure is in not noting that, per value of sales, Costco utilises about half the labour that Walmart does. One chain is following a labour intensive model the other a labour light one. And if the insistence is going to be that wages should equalise across the two models then the labour utilisation is going to equalise too. That is, insisting that Walmart follow the Costco model is going to lead to some half of Walmart's current labour being  offered the opportunity to contribute elsewhere in the economy. That is, to lose their current jobs.

That Lidl, running a labour light model, can pay this Living Wage does not mean that those running more labour intensive models can also do so - not while continuing to run labour intensive models that is.