Our Battle at Boots: The Recession Diaries - October 23rd

Sometimes, something happens that takes your breath away. The chain store Boots is engaged in a deplorable assault on their employees’ wages and working conditions – employees who are some of the lowest paid in the economy. Not only that, it constitutes an assault upon other enterprises, the Exchequer and the Irish economy.

Let’s do some background. Over the summer Boots and the representatives of their employees – Mandate – met on a number of occasions to discuss a range of cost saving measures. In particular, management demanded:

• 15.5% wage reduction at the top scale of pay from €14.20 to €12 per hour
• 25% reduction in public holiday pay
• 25% reduction in Sunday Premiums
• Increased flexibility in weekend work for full time staff

Unsurprisingly, the negotiations didn’t go too well, especially given that Boots is a profitable enterprise. Mandate requested the company attend the Labour Relations Commission (LRC) to sort matters out. Suddenly, in August, Boots management wrote to the union stating that unless Mandate accepted the new pay and working conditions, Boots would terminate all existing collective agreements negotiated with the union over the past fifteen years. In addition, the management stated they would not attend the LRC. This action certainly wasn’t intended to build an atmosphere for constructive dialogue.

Eventually, management relented and attended the LRC with Mandate in October. However, such was their attitude, they might as well not. All they were prepared to do was remove the threat to the collective agreements if the union unconditionally accepted the new conditions of employment in full.

Currently, Mandate is balloting Boots employees for industrial action. The ballots will be counted on November 6th – ICTU’s National Day of Action.

It doesn’t get much worse than this. A full-time 39-hour per week employee at the top of the scale earns €28,800 – about 30 percent below the average industrial wage. Boots management is demanding a pay cut of nearly €4,500 a year. That’s savage. But Boots management isn’t just targeting those at the top of the scale – they’re demanding 25 percent cuts in holiday and Sunday pay for all employees.

This isn’t a company in trouble. In 2008, the Irish division in Boots earned €20 million in 2008 with current cash reserves in excess of €70 million. Worldwide, Alliance Boots posted an EBITDA of over £1 billion in March this year (that’s trading profit before depreciation and amortisation) while their underlying profit – excluding finance costs – is a healthy £236 million.

Okay, but what now? How has the recession and the decline in consumer spending affected Boots? Probably not much. The CSO’s Retail Sales Index shows all businesses suffering a drop of 7.5 percent in sales (from a 2005 base year). But sales in the Pharmaceuticals & Cosmetic Articles group have actually increased by 17.1 percent – the biggest increase of any retail grouping. That doesn’t’ necessarily mean that Boots turnover or profits have increased by that amount. But since it is a major player in this grouping, we shouldn’t be too surprised to see them staying relatively dry in this recessionary storm.

To be fair to Boots (which is owned by a private equity firm), they’re not just having a go at their own employees. They have recently withdrawn from the Ethical Trading Initiative, which was established 10 years ago to tackle the use of sweatshops in the developing world (members include, Tesco, Sainsbury's and Marks & Spencer to name a few). A Boots spokespersons explained their decision this way:

‘The reasoning for this is because it (the Ethical Trading Initiative) only concentrates on labour standards and at Boots we focus on all aspects of sustainability, with labour standards only one aspect of many that we need to consider.’

Yeah, sure, whatever.

The treatment of employees is bad enough – it rightly offends most people’s sense of justice and fair play. The issues, however, spill out of the workplace and into the larger economy. For instance, Boots is not just attacking its workforce – its attacking the Exchequer.

A full-time employee on the top of the scale is paying a little over €4,700 in income tax, PRSI and levies. In addition, employers’ pay a little over €2,900 in PRSI. The total benefit to the Exchequer is about €7,650.

If, however, Boots succeeds in cutting wages at the top of the scale, the benefit to the Exchequer falls by over €2,700. Even including the potential increase in corporate tax revenue (if Boots pays at the nominal 12.5 percent; it should be pointed out the real effective tax rate, when allowances and reliefs are included, is less), the net loss to the Exchequer would be over €2,100 for each Boots worker in this category.  Now calculate the tax loss (and this doesn't count lost VAT revenue from reduced spending) from the full range of pay cuts that are being demanded from the 900+ employees in the chain. 

The owners of Boots gets the gain; the workers – both in Boots and throughout the economy – take the pain.

And it doesn’t stop there. Staying with the full time Boots worker at the top of the pay scale, her/his disposable income would fall by nearly €40 per week. If we accept that most of this money would have been spent (those on low and average incomes have a higher propensity to spend, unlike those on higher incomes who have a higher propensity to save), then that’s money not flowing to the proverbial local shops.

Businesses reliant upon selling goods and services into the domestic economy will suffer a loss of turnover. Many of these businesses are genuinely in trouble. This decline in sales will hit them even harder with all the consequences this may hold: lower profits tax, reduced wages and/or hours, job losses: this is the deflationary process set in train by Boots. It’s not just their own workers who get slammed, it’s not just the Exchequer that gets hit – other businesses, their owners and workers, also suffer.

[Note: this is just one more example of why those economists who claim that wage cuts will automatically increase employment are wrong. The actions of Boots management is not about saving jobs, never mind creating more. It’s about enhancing profits for a private equity firm.]

That’s why the looming battle at Boots is not just a fight that only concerns those who work there. It’s our battle as well. It’s not just about ‘an injury to one is an injury to all’. This is a battle over public finances, this is a battle over economic growth, this is a battle over all our living standards.

That’s why, if the employees at Boots vote to take industrial action, they deserve our fullest support.

If you want to help create public support for the Boots workers – and hopefully force management to step back from their damaging course of action before it comes to industrial action – please spread the word.

You can circulate this e-card from Mandate to family, friends and work colleagues

Comments

[tgmac]

I think the pertinent question here is: Is there anything that can be done to stop the Boots* of this world? Govts across the West and beyond begin all policy from the viewpoint that what is good for business is good for society. And I mean all policy decicisions, however tangental to overt business exercise, can be analysed through the Neo-liberal Capitalist perspective.

Tbh, when I first came upon the Progressive's current exercise which uses, for want of a better term, classical economic analysis to highlight the deficencies of current govt policy, I thought the approach rather wishy-washy. After a rather lenghty survey of Socialism in Europe and beyond, the Progressive approach seems like the only game in town. Leftists, of any hue, are either intellectually bankrupt political economy wise; content to argue amongst themselves about obscure Marxist analysis without creating real world policies; or are just dressed up in a reddish tinge of NLC.

On another site, you asked where the passion was. It doesn't exist in any degree. NLC has driven very large wedges between various wage earners. While the left can get righteously indignant about the BNP appearance on telly, it can't honestly debate the fact that agency workers are being used to deflate all workers wages. The left, by and large, doesn't have the nous to counteract NLC tactics. There is a lack of honesty, vision and adapability required to put forward a more comprehensive alternative to the present system. While the Progressive economists can provide the economic ammunition, the broad left doesn't have the policy vision or philosophical underpinnings required to use the ammunition provided.

An entirely new approach is needed and the left hasn't advanced such an approach in its totality; nor in fragmentary forms. There is a deep psychological uneasiness within the wage earning cohort. On the one hand, they instincively know that they have to have some sort of collective bargaining power to ward off the excesses of the ownership cohort but they also believe or act, in parallel, by being repulsed by the image of a state, party or any collective system that is portrayed as directing every facit of their lives and therefore diluting individual identity. (There is a bit or irony at play here, imo, as Statist Capitalism is becoming a reality in the West. The mythology of free market doctrine masks the wholesale manipulation of the economy and society towards certain outcomes that favour select cohorts. However, there is spreading unease about this situation also.) It is in this nexus between individual freedom and the necessity of social cohesion in which passion is stirred. It is exactly where leftists fail most miserably - they operate in a philosophical vacuum. Beyond wholesale acceptance of neo-liberalist philosophy, the left is largely unable to debate and create policies which address the tensions between individual liberty and collective responsibility; no matter talk about value distribtuion.

*I could just imagine the cartoon imagery of the jack boot stepping on the poor worker which would have appeared as a matter of fact in the 60s, 70s, or 80s. Such would seem trite these days, if not still relevant. Maybe more so.

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If we accept that most of this money would have been spent (those on low and average incomes have a higher propensity to spend, unlike those on higher incomes who have a higher propensity to save), then that’s money not flowing to the proverbial local shops.