Poor Pret

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I always find it amusing when the bosses of large companies demonstrate an impressive lack of understanding of market forces. A few days ago, the HR director of sandwich/coffee chain Pret a Manger told a parliamentary committee 'I would say one in 50 people who apply to our company are British', citing this as a reason they need to continue having access to cheap foreign labour. She also said that she didn't think pay was an issue, despite a starting package of around £16,000 in London, as after a few years you could earn a lot more.

Picking this apart, I've a few issues with this argument. I don't have any evidence for that 'I would say one in 50' (don't you find 'I would say' suspiciously vague?) - is it true at all? Is it only true of central London stores? Or is that a countrywide average? Without data it's impossible to say. But let's take it at face value. What the market is really saying is that the rewards aren't good enough for the job, and they can only maintain that £16,000 starting salary (resulting in £84 million profit in their results for 2015) by employing people for whom an amount it's difficult to live on in any expensive location seems a lot of money because they come from a country where that is a large pay packet (or they're doing the job for other reasons, such as learning a language).

If the supply of cheap labour dried up there's a simple solution. You put up your starting salary until you do get enough people applying. If you have to put it up so much that you don't make a profit, you don't have a viable business model. That's what market forces are about.

Companies like Pret have had it easy to date, because they operate in a 'pile it high, sell it expensive' market. Their staff costs per head are low, but they sell premium products (i.e. ones where a small increase in cost results in a considerable increase in price). The world is changing, and poor Pret feels sorry for itself. I'm afraid I can't join in the sobbing.

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