New supermarkets destroy more jobs than they create – open letter to Craig #Whittaker MP

Dear Craig Whittaker,

I question your statement, reported in the Hebden Bridge Times, that a proposed new supermarket to be developed on the Mytholm Works site will create new jobs.

In fact, new large supermarkets destroy more jobs than they create. One source of evidence for this is the paper “Superstores and Employment in Retailing” by Dr David Thorpe, Head of Research, John Lewis Partnership, October 1999.

This paper, published by the National Retailer Planning Forum as a contribution to debate about the effect of supermarkets and other large stores on retail employment, found that the evidence is that superstores reduce reduce retail employment both in Full Time Equivalent (FTE) and head count terms (ie the actual numbers of employees in full time and part time jobs).

Between 1991 and 1995, superstores contributed to a loss of 151,000 FTE jobs and 136,000 ‘heads‘  (ie actual employees, whether FT or PT).

Superstores have resulted in a net loss of jobs in the retail sector – even part-time jobs

Dr Thorpe’s findings are based on an analysis of available official statistics between the mid 1970s to the mid 1990s. His paper shows that, despite considerable growth in retail sales, over that period there was a long term decline in full time employment in retail, and an overall stability in total numbers. This means that even though part time employment increased, the increase in part time staff was not been big enough to make up for the loss of full time jobs.

He points out that if claims for the creation of new jobs by new supermarkets were true, this should be reflected in the number of jobs in the retail sector. But they are not visible in the data.

Reasons for new supermarkets’ negative effect on retail sector employment include the fact that supermarkets are designed to reduce the number of shop workers needed to sell a given amount of goods, whether this is measured by volume or real price. They do this by replacing labour with capital, and also with the labour of shoppers, who serve themselves and even check out their own purchases.

In addition, new supermarkets put existing independent shops out of business, so jobs are lost in the independent retail sector; and the sales that supermarkets divert from these independent shops are made with fewer retail staff than the independent retail sector had employed to make those sales.

Media’s delight in spin doctors’ and pr agents’ claims of job creation

Dr Thorpe’s paper “Superstores and Employment in Retailing” states that findings about net job losses in the retail sector as a result of new supermarkets have:

“to be put in the context of the media’s delight, from time to time, in finding large numbers of jobs which… are to be ‘created’ as a result of an opening [of a large store]. From such a viewpoint, and sometimes from the viewpoint of a local authority competing for jobs with its neighbours, it is almost impossible to stop a spin doctor or PR agent from claiming so many jobs will be ‘created’ by a development.”

He also points out that planning application forms reinforce this impression, because they tie the number of jobs to the amount of floorspace. But job losses resulting from new supermarkets are harder to see, because they happen over time, generally in small shops, and can involve shedding staff from existing shops without necessarily leading the closure of shops.

A new supermarket offers the prospect of some new jobs in an area – generally minimum wage and part time, but at the cost of a net loss of retail jobs in the area. So, more people end up out of work.

Supermarkets harm independent shops through anti-competitive practices against the public interest

Although Dr Thorpe’s research used data from the mid-1970s to the mid-1990s, the patterns that he identified have also been found in later periods. In 2005 the Advisory Committee for Consumer Products and the Environment accepted evidence that supermarkets harm independent shops.

A 2006 Defra study, Economic Note on UK Grocery Retailing, identified mechanisms whereby supermarkets harm independent shops.

People who buy into the supermarkets’ ideology believe that when supermarkets drive independent shops out of business, this is an example of competition at work, to the benefit of the economy at large and to customers in particular.

But the 2006 Defra study, Economic Note on UK Grocery Retailing, reports that this is an example of anti-competitive behaviour,  made possible by supermarkets’ monopolistic control of supply chains.  This has narrowed the supply base for independent shops and

“may limit consumer choice by undermining the viability of alternative business models (such as wholesaler-supplied convenience stores)”.

The 2006 Defra study also notes that supermarkets’ entry into convenience stores has aroused fears in the Association of  Convenience Stores that:

  • this may put further pressure on suppliers to sell at a low price to supermarkets, so that suppliers are forced to charge higher prices to independent retailers.
  • and that “supermarket buyer power could undermine the viability of the wholesale distribution network serving independent stores.”

The government recently appointed a Groceries Code Adjudicator to enforce the 2010 Groceries Supply Code of Practice, brought in to tackle supermarket’s anti-competitive practices in the supply chain. It remains to be seen whether this will solve the problem.

The Competition Commission identified other anti-competitive supermarket practices in 2000. The CC found that some supermarket pricing practices

“gave rise to a complex monopoly situation…and also operated against the public interest.”

Specifically, it found that

“…the practice of persistent below-cost selling when conducted by Asda, Morrison, Safeway, Sainsbury and Tesco, ie those parties with market power, operates against the public interest.”

Supermarkets profit from taxpayers’ subsidies

Despite evidence that new supermarkets destroy more retail jobs than they create, the Coalition Government has promoted supermarkets as a vital way of making good their claim that cutting public sector spending and jobs will free up the private sector to create more jobs and drive economic growth.

In 2011, David Cameron invited big firms, including supermarkets, to a jobs summit. This was followed by  a wave of supermarket pledges to create new jobs. However, in 2012 the Daily Mail reported that the only 42% of the pledged new supermarket jobs materialised, once staff cutbacks at existing stores were taken into account.

Plus, these new supermarket jobs do not take into account job losses in independent sector stores that have resulted from loss of trade to new supermarkets.

It’s worth looking more closely at the relationship between big corporations, including supermarkets, and the Coalition government.

Big corporations, including supermarkets, have publicly endorsed Coalition government public spending cuts and hailed the opportunities this policy has created for private sector growth. But their  private communications tell another story.

For example, a 2010 letter to the Daily Telegraph, signed by 35 big corporations including Asda, supported  this policy. But leaked private communications show these same corporations stating that Coalition government public spending cuts would in fact reduce customers’ disposable income and so damage their businesses, and big corporations were making large numbers of their employees redundant.

So why have big corporations paid lip service to the policy of public spending cuts? Could it be a case of vested interests?

At least some of the companies that publicly acted as cheerleaders for Coalition government public spending cuts have benefitted from government contracts.  Shortly after signing the 2010 letter to the Daily Telegraph, Arup was awarded a major rail contract by the government, BT’s government contracts were renewed and deals done on government contracts with Microsoft and AVEVA.

Supermarkets too have self-interested reasons for cosying up to the Coalition government:
the new jobs that supermarkets create are heavily subsidised by the taxpayer, since most of the jobs are so part time and badly paid that the state tops up employees’ wages with tax credits.

This subsidy out of public money allows supermarkets to pay more profits to shareholders than would otherwise be the case, and to keep prices lower than they would be able to if they paid staff a living wage.

The 2006 Defra study, Economic Note on UK Grocery Retailing, reported that price competition between supermarkets means that their operating margins are generally low, averaging 4.2% in 2004/5.

Without public subsidy, supermarkets would find it difficult to make a profit without increasing their prices, which would lose them custom and make independent retailers more able to compete on price with them.

Basically, taxpayers pay for the cheaper prices that supermarkets can offer.  As customers, people may benefit from low supermarket prices. As taxpayers, we pay for them.

The public subsidy to supermarkets runs counter to the Coalition government’s policy of cutting public spending; but apparently public spending is ok if it boosts the profits of big companies and keeps prices down, which in turn serves to keep wages down.

New supermarkets appear to be key to the Coalition government policy of providing state subsidies to big corporations, while cutting public spending that benefits the public.

Yours sincerely,

Jenny Shepherd

One thought on “New supermarkets destroy more jobs than they create – open letter to Craig #Whittaker MP

  1. We made all the same points to our councillors, assembly members and MP here in Llangollen. They preferred to listen to Sainsbury’s PR spin. Superstore due to open next year. Vibrant town centre with 2 butchers, 2 greengrocers, 2 delis, 2 bakers, 2 hardware stores, 2 newsagents, 2 clothing stores and 3 convenience stores under threat.

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