Sainsbury’s wage increase is welcome, but supermarket profit-hoarding is rife

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Sainsburys

The singling out of Sainsbury’s misses the wider point about the profitability of the big retailers

It was a welcome development to see investors pressuring Sainsbury’s to adopt the real living wage last month. The subsequent rise in rates for outer London staff, announced earlier this week, has also been welcome. But, as others have observed, Sainsbury’s has been singled out when its wage structure isn’t an isolated example in the wider industry.

For years the big retailers have operated under the radar, with wage structures that have effectively benefited from ‘welfare capitalism’ and deepened inequality between women and men working in their operations.

Their substantial marketing machines, which frequently highlight their corporate social responsibility initiatives, have reassured consumers over the years they are benevolent employers and supporters of our communities. However what is rarely analysed is the impact of their market power over the UK food and drink supply chain, and the pressure that brings to suppliers and their workers throughout that chain, as well as their own employees.

It was telling that in October 2021 and March this year, Two Sisters, one of the UK’s largest suppliers, noted that consumers, including workers, would be required to pay more for increases in costs – but missing from this observation was any suggestion that retailers could afford to absorb these costs.

This is a telling omission. It reinforces the private view of many UK suppliers that the power of the retailers forces them into increasingly one-sided negotiations, and which are contributing to the continued reduction of working standards in the industry.

Similarly in the government’s National Food Strategy, any measures that might have impacted on food costs were immediately referenced to consumers, without any consideration that the big retailers could absorb rises.

That is why the singling out of Sainsbury’s misses the wider point about the profitability of the big retailers and ultimately the sustainability of the UK food and drink supply chain.

Last year alone, the top supermarkets banked £1.1bn in profits among them. An astonishing figure, but one that is not remarkable in the history of the industry.

In contrast, there is quite rightly a current focus on the price gouging of the big six energy companies. Many argue that energy for heating and cooking is essential and should not result in consumers being exploited, given they have limited options in a supposedly competitive market. This has resulted in frequent calls for taxes on windfall profits.

Yet there is almost no discussion on the profits made by the big supermarkets.

They too provide an essential service. However there has never been any call for a windfall tax on their profits, let alone any debate on their capacity to pay a real living wage to their own workers, address the inequalities inherent in their wage structures and support a sustainable food and drink supply chain.

Over the years, these retailers have sucked huge amounts of profits from an entire supply chain, including their own workforces. Systems are increasingly trending toward statutory minimums, with pension schemes closed, compensation removed for working hours that are unsocial and not family-friendly, continued reductions in company sick pay, some to basic SSP, moves to 24/7 production and many more overall reductions.

Perhaps the most pernicious aspect of their profit-hoarding is the way some retailers have fiercely responded to legal challenges regarding their wage structures, which have been found to be discriminatory by tribunals. Many retailers are throwing huge amounts of money at defending an inequitable status quo, raising questions about their real intentions.

The action by investors in Sainsbury’s should be a clarion call to the entire industry to sit down with the relevant trade unions and government and address the long-term sustainability of the entire industry supply chain. It is absolutely essential to everyone in our communities.