Economy & Business

Don’t Blame Staples

In the matter of perverse economic incentives, the perverts are in Washington.

I, for one, welcome our new robot overlords. But they have taken some getting used to.

For me, it started with the self-checkout aisles at the CVS at Fulton and Nassau in New York, the Hotel California of Manhattan convenience stores. They never seemed to work quite right, and when I was in CVS I was generally buying something that required age verification or a trip behind the secure counter (you go through a lot of high-dollar razor blades with this hairdo). But CVS and I both eventually figured out how to make the process work, and it turns out that the dumb self-checkout terminals are about as smart as the human checkers and twice as efficient. Now, whether I’m at the bank or the grocery store, human interactions feel atavistic, as though I or the business has failed in some way. Filling up the car in New Jersey — where self-service is verboten — feels as retro as gasoline with lead in it, like the guy should be wearing a peaked Sinclair cap and rinsing off my whitewalls.

Japan opened its first fully automated convenience store way back in the 1990s, though in reality it was mostly a high-tech version of the old automats that were popular in New York and Philadelphia back in the 1950s. (In New York, most of the Horn & Hardarts became Burger Kings, surely an instance of techno-social regression — just think about the sort of people who work at Burger King.) While the automats lost market share to proliferating fast-food franchises, they endured until the 1970s, when inflation wiped out their coin-operated business model. (A few survived as nostalgic curiosities.) The number of nickels it took to pay for a patty-melt made automats inconvenient, and the Clown, who never misses an opportunity, made his move. Such is life in the (mostly) free market.

If I were the brass at Staples, I’d be looking into some serious Buck Rogers–style robot development.

Staples, which is in the process of acquiring former rival Office Depot, became a topic of national conversation this week when Barack Obama, speaking to Buzzfeed, denounced the company for allegedly chopping part-timers’ hours in response to the Affordable Care Act, a.k.a. Obamacare, which requires that firms pay for health insurance for employees putting in more than 30 hours a week. At the end of 2013, Staples put out a policy informing managers that no part-timer should be scheduled for more than 25 hours a week; Buzzfeed, which is big on the Dickensian-state-of-Staples-employees beat, claims that “Staples Threatens to Fire Staff for Working More than 25 Hours a Week,” but that isn’t exactly right, either: One store manager did post a notice making that threat, but that’s not the same thing as a corporate policy. Staples claims — unpersuasively — that this is a decade-old, pre-ACA rule, even though Staples “talking points” distributed to managers in 2014 identify it as a new policy. Staples is pretty clearly drawing a line in the managerial sand here, and part-timers are going to be on the less-than-25-hours side of it.

I can’t blame Staples. For one thing, Staples employees are awful. If you doubt me, read this Reddit thread written by Staples employees on the subject of — note well – self-checkout stations. On the one hand, you have the confident Staples man: “I can only imagine that our customers – who are barely capable, by and large, of tying their shoes in the morning without choking on their own drool – would never get the hang of it.” On the other hand, you have the Staples employee who is just about smart enough to get it: “You do realize if that was ever implemented, they would cut store hours even more?”

Demand curves slope downward. Which is to say, if you raise the price of something, people will be inclined to consume less of it. Those with a choice in the matter – say, a large office-supply chain with a mess of low-skilled part-time employees who are basically as interchangeable as toner cartridges in the greater scheme of office-supply things – will in fact consume less. If the thing that is getting more expensive is manpower, it will cut employees’ hours, circulate a lot of those dopey “do more with less” memos, and look for labor substitutes, like the banks did with those ATMs that haunt President Obama’s imagination.

Sometimes, you have to go full robot.

That’s basically what’s happening with San Francisco’s beloved Borderlands Books, a pilgrimage site of old-school nerdery specializing in science-fiction and fantasy literature. San Francisco is raising its minimum wage from $11.05/hour to $15/hour, and the owners of Borderlands, who already were barely able to make the shop a going concern, announced that they would have to close. The minimum-wage hike meant that the store was going to go from making a princely $3,000 a year to losing $25,000 a year. Of course, you’ll still be able to get your sci-fi and fantasy novels – from Amazon, or from another similar operation without the labor costs involved with running a conventional bookstore. Which is great if you’re Jeff Bezos, but kind of stinks if you’re the sort of sad character (ahem) who likes to lurk around in bookstores. I’m perfectly happy to see every Staples clerk replaced by something sold to Staples CEO Ronald Sargent by Jawas offering a deep corporate discount. But, damn it all, I like bookstores. (And if San Francisco continues raising its minimum wage, the robots are ready.)

In San Francisco, the people who were bemoaning the impending closure of Borderlands admitted sheepishly that they’d voted for the minimum-wage hike. “It’s not something that I thought would affect certain specific small businesses,” one customer said. “I feel sad.”

Yeah, Adam Smith feels sad, too, you dope.

Thick though they may be, you know what those economically illiterate San Francisco book-lovers aren’t? President of the United States of America. But President Obama does precisely the same thing: With Obamacare, he created powerful economic incentives for companies such as Staples to keep part-timers under 25 hours – and to hire part-timers rather than full-time employees – and now he complains when companies respond to those incentives. Naturally, he cites executive pay: “I haven’t looked at Staples stock lately or what the compensation of the CEO is,” he says, but affirms that he is confident that they can afford to run their business the way he wants them to run it.

Let’s apply some English-major math to that question. Ronald Sargent made just under $11 million a year at last report. Staples has about 83,000 employees. That means that if it cut its CEO’s pay to $0.00/annum, Staples would be able to fund about $2.61/week in additional wages or health-care benefits for each of its employees, or schedule them for an additional 22 minutes of work at the federal minimum wage. Which is to say, CEO pay represents a trivial sum — but the expenses imposed by Obamacare are not trivial.

On this issue, President Obama brings all of the honesty and integrity he applied to the question of gay marriage: He’s lying, and he knows he’s lying, and his apologists in the media know he’s lying, and Democratic time-servers and yes-men across the fruited plains know he’s lying. This isn’t about CEO pay – it’s about the economic incentives created by the health-insurance program that in the vernacular bears the president’s name. The president, with the support of congressional Democrats, effectively put a tax on full-time jobs, and on part-time jobs offering 30 hours per week or more. So we’re going to have fewer full-time jobs, and fewer part-time jobs offering 30 hours per week or more. This wasn’t cooked up in the boardroom at Staples – it was cooked up on Capitol Hill, with the eager blessing of Barack Obama. It’s not like they don’t know that there are economic tradeoffs necessitated by Obamacare — they know it, and they also know that, politically speaking, their supporters are cheap dates. Obama ran to the right of Dick Cheney on gay marriage, and it didn’t hurt him with gay voters, who were happy to be reduced to mere instruments of his ambition. The Democrats are betting that part-time workers are similarly easy – or that they’re too dumb to understand the economics at work here, and that they’ll be hypnotized by ritual chants about CEO pay.

What’s true in San Francisco is true in Washington: You don’t get to bitch about the perversion of economic incentives when you’re the pervert.

— Kevin D. Williamson is National Review’s roving correspondent.


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