The UK Asda Equal Pay Case

Recently I shared an article about the UK’s unhinged equal pay laws. Since then, there has been another more consequential employment tribunal in which Asda (a supermarket chain) has been judged to be paying some in-store women workers less than other warehouse male workers, despite their work being judged as of “equal value.” The potential bill runs into billions of pounds if Asda is found guilty in court, and many billions for the industry as a whole if other cases follow.

The Guardian reports that this latest employment tribunal “ruled that 12 out of 14 lead claimants in the case, which involves 60,000 people, mostly women working shop-based jobs, had roles that were of equal value to their mostly male counterparts employed in the retailer’s warehouses, despite being paid up to £3.74 an hour less.” In other words, the “experts,” by assessing various aspects of the roles, judged that checkout operators and shop floor assistants were of “equal value” to those doing warehouse jobs. Because the former were disproportionately women, in relative terms, Asda would therefore fall afoul of the law - market pay realities be damned!

This case is even more peculiar than the Next case, however, because two store roles (online shopping packers and store workers who only handle edible groceries, about a fifth of the claimants) were found to be doing jobs not of equal value to warehouse roles. Yet those two roles were paid the same market rates as some other in-store roles, meaning the employment tribunal was implicitly saying that in-stores jobs with the same pay rates were nevertheless unequal in value too.

My ex-colleague Simon Gaysford (who has been tracking this closely) highlights the absurdity here and how it might affect the industry:

The value of something in a well-functioning market is driven by the interaction of supply and demand, not by any assessment or scoring of comparative points. If you move away from that belief, you will (a) crash the economy and all the incentives within it and (b) come to some very bizarre and unexpected consequences.

Part of the recent ruling asserted that some replenishment roles in stores were of “equal value” to some roles in distribution, and some were not. But those different replenishment roles in stores are paid the same amount; they are determined by the same conditions of supply and demand, done by the same person and interchangeable. The market rate is equal.

Call the two roles in store A and B, and call the role in distribution C. The employment tribunal’s view is that A equals C but B does not equal C, when everyone in the world can see that A equals B. So, either both A and B equal C, which is logical but inconsistent with economic facts, or neither A or B equal C, which is logical and fits with the economic facts (note these are economic facts about how workers on the supply side and employers on the demand side have valued these roles; this is not some abstract economic theory).

If the ET is correct there must be discrimination between A and B (the two instore replenishment roles) because they are currently paid the same when one of them is different in value. How is this to be resolved? More importantly, how many other roles are “incorrectly paid” according to this approach? How would you know? You can’t trust the market so you need an expert assessment for every hiring, promotion and pay award decision.

Follow the logic the other way and see where it takes you. The retailer operates in a competitive market and can either choose to have distribution in-house or not (these are not joint activities – they are combined by some for efficiency reasons, and there are many retailers and distributors which are not integrated). If a court tells you that workers A and B must be paid the same as C, despite the fact that the market rate for A and B is less than C, then the obvious option is to stop doing distribution. There is a competitive market for distribution services (which pays C), and the retailer can then just pay retail rates (A/B); indeed, any retailer not doing so will be at a competitive disadvantage and will lose money. So, whatever the court outcome, market wage rates will not change; we will simply see a (retrospective) transfer of value from shareholders to a selection of employees, massive reorganisation of these industries, a loss of efficiency, and some wealthy lawyers.

As Gaysford concluded earlier in his post: “be very wary of experts putting values to things that are different from a well-functioning market.”