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Not To Blame – The National Living Wage & Toys R Us

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Sad, if not surprising news from the UK high street with a slew of retail restructurings – Toys R Us and Maplin have called in the administrators and Prezzo (and the related Chimichanga chain) are retrenching with many branches closing.

In many ways, we have both been here before and have only ourselves to blame. Internet shopping inevitably has a high street impact, as these pages have noted, and retailers can all too easily be outmanoeuvred or left behind by changing market trends.

But in the dissection of the fate of Toys R Us and Prezzo, lurks a worrying mind-set – a world-view that has lost credibility, an analysis that is decaying and rancid. And the worry is that this warped rationale could, almost literally, rise from the economic grave and start tramping around like a demented spectre.

Colourful stuff, eh?  But a tad too melodramatic?  Let me share with you what Julia Palmer, from Begbies Traynor, had to say. “Rising costs from the National Living Wage, apprenticeship levy and inflation………are hitting retailers with a big High Street presence hard.”

And the Guardian (of all papers?) reported on Prezzo’s woes saying it “is one of several high street restaurant chains to announce restructuring plans because of “the national living wage” …….”

Look, everyone knows that staff costs are just that – a cost, albeit offset by the skills, sweat and experience of workers.  We also know that the National Living Wage is hardly excessive:  £7.50 per hour for over 25s.  And we know too that state intervention in the labour market, which saw the Low Pay Commission established at the end of the last century, has been all-but universally accepted. The Commission survives as one of the last few tri-partite bodies, and it was a Conservative-led government that expanded its remit to include not just the National Minimum Wage, but the now-maligned National Living Wage too.

So, to pin the blame for these latest reverses on pay rates seems to buck a trend, economically as well as politically.  And the inescapable direction of travel is that even these modest rates of pay are unsustainable. I think we need to reflect very carefully on that.

In-work poverty is not a myth.  A wage floor gives security and predictability to both workers and employers.  And in any debate about “good work”, and “decent employment”, there is a damaging contradiction in treating the statutory pay floor as in any way discretionary, rather than as a solid foundation for successful business and a successful economy.

But let’s take a step back.  It would be rash to presume ill-intent on the part of either the Guardian or Ms Palmer.  If the paybill, and the increases in total pay costs, are an identifiable feature in a failing business, that clearly needs to be addressed in some way.

It surely can’t be expecting too much that the ability to honour those minimum rates of pay should be hard wired both into business models, but also into regulatory structures too? Put simply, businesses should not allow themselves, or be allowed by others, to fail on the basis that the pay floor – clearly visible to them as they bring their ventures to the market-place – is unaffordable.

I know it is one thing to say this, and another to do, but as a start, perhaps we could look to see why this was one legal obligation that Toys R Us, and Prezzo, seemed to have overlooked.

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