So Cheap We Can’t Afford It?

As the Sunday Times reports that Topshop uses cheap labour in the far east to make their clothes Rachel Elnaugh writes:

…accountants Grant Thornton have just brought out a report showing that the major supermarkets are abusing their powers to put food suppliers under.

Personally, I don’t think the blame lies with Philip Green or with Tesco et al. There will always be capitalists ready to take commercial advantage of any situation.

The blame actually lies with us as consumers.

I couldn’t agree more, so long as we as consumers demand cheap goods and are not prepared to pay more for quality or service there are going to be businesses that (as all good businesses should do) give us what we want. The reality is that most of us do not care how they achieve it, until we change our attitudes we shouldn’t expect the businesses to.

Stepping back and looking at things carefully though are they really exploiting the workers in the far east? It’s easy to be disgusted at seemingly low wages (40p per hour) but they need to be put in context. The article in The Times describes the wages of £25 per week as being 40% below the local average wage. Looking at the Office of National Statistics (ONS) stats in the UK the weekly average wage was £447 in April 2006 someone taking 40% below this would be making £268.2 per week (just over minimum wage). Yet looking at the minimum wage that the Mauritius Government has set for factory workers it is 110.09MR per day, which is £9 per week.

Unfortunately I could not find any official statistics on the cost of living in Mauritius, but I did find some houses for rent that suggested the cost of renting a house is approximately ten times less that it is in the UK, offering a nice 4 bedroom house for around £100 per month.

Taking all that into account you could argue that they recieve a reasonable level of pay, certainly well above the minimum wage. The reality I suspect is somewhere in between.

I would love to see the report that Grant Thornton have compiled showing that the major supermarkets are putting their food suppliers under. I find it hard to believe that the supermarkets have a deliberate policy of putting their suppliers under, after all without their suppliers they will have nothing to sell to their customers. I continue to believe that the suppliers themselves are largely to blame for this situation as I have explained in an earlier post.

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• 1

  Hi John

  I always take Press articles with a pinch of salt but if you read the Sunday Times one it was quite upsetting – with workers from Malaysia having left their families, paid £750 to relocate to Mauritius in the promise of a far higher wage and then once there ‘trapped’ into the 70 hour £25 week, sleeping in crowded dormitories – with no way of getting home again. One woman ‘cried herself to sleep’ every night, having left her husband and son at home to go seek the family’s fortune in the hope this would secure their future.

  As regards Tesco, have you ever supplied them?

  Then you will know it goes like this:

  - They approach you to supply them; you believe all your business dreams have come true
  - You step up production and make the necessary business investment (often highly leveraging yourself in the process), believing this is a ‘long term partnership’ which will take your business to the next level
  - Come Year 2 their buyers ruthlessly screw you on price, often demanding lower prices than Year 1, knowing you now cannot afford to lose the contract

  Of course if you do not comply with their demands there are plenty of other suppliers just ready and waiting to step in your shoes.

  This is not just Tesco, it is how all major supermarket/multiple buyers are trained and incentivised. It is a ruthless process.

  Of course the natural result (if you are a supplier) is to take the lower deal – and then cut corners in production to lower your costs.

  Hence why, on principle, I NEVER shop in Tesco – and if you saw the recent Whistleblower programme on their deli counters and what goes on, neither would you …

  Regards

  Rachel

  Rachel Elnaugh on August 14th, 2007
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  Rachel,

  I grew up living overseas and spent several years in Brazil where sadly slave labour is still far too common, I’ve seen people living in horrible conditions and while it truly saddens me, I don’t have an answer.But I’m sure that the likes of Top Shop moving their manufacturing elsewhere and taking all those jobs away from those people will hurt them more. Equally I doubt paying them more will work, the extra will end up being taken by the middlemen, it’s a complex problem and one I don’t have the answers to, but I’m convinced that the knee jerk reaction that most people will have to the article will make those people worse off.

  A friend of the family Binka Le Breton is actively doing something about this kind of thing in Brazil, her work amazes me and I hope that should Topshop et al chose to do something about it that they consult with people like her first.

  I’m going to address your questions re supplying Tesco et al in full post as I think there are some important points in it. With regards to the recent Whistleblower it’s not really changed my shopping habits, I’ve seen much worse hygiene while living in third world countries and I’ve never really treated UK shops any different to those I’ve encountered overseas so I’m always careful to inspect what I’m buying.

  What did stand out to me in the programme however was the fact that not once did I see a senior member of the management staff instruct the employees to actually do what they were doing. Sure they all claimed the management puts pressure on them do x,y and z but not once did the programme show proof that management had actually done so. From past experience I’ve found that employees often believe that they know what the boss requires, expects or demands of them, when in fact their boss may be appalled at what they are doing. In many cases staff are unwilling to step forward and give their boss bad news, a problem that from this interview I believe you’ve seen first hand and which happens at every level from the most junior member of staff through to the boardroom.

  In most of these cases I believe that the fault lies with the business for having incompetent, poorly trained staff who do not have a clear understanding of the businesses goal or “mission” and are not empowered to deliver on that mission. It does not however mean the business has a deliberate policy of being evil, or in this case selling unsafe food.

  John on August 14th, 2007