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Unilever’s mistake about the supply chain

Summary:
This is worse than a mistake, it’s an error:Millions of people around the world are in line for a pay rise after Unilever pledged that every worker in its supply chain will earn the living wage by 2030.One of the canonical works of popular economics is I Pencil. An inverted reading of which is that the supply chain of something - of anything at all - is the global economy.As it’s not possible to ensure that everyone in the global economy is paid a particular wage the effort is doomed from the start.The consumer goods giant said it will require its direct suppliers to pay staff a local living wage that allows “workers to participate fully in their communities and help break the cycle of poverty”.That may be how it starts, to that first level of the supply chain. But that’s not where the

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This is worse than a mistake, it’s an error:

Millions of people around the world are in line for a pay rise after Unilever pledged that every worker in its supply chain will earn the living wage by 2030.

One of the canonical works of popular economics is I Pencil. An inverted reading of which is that the supply chain of something - of anything at all - is the global economy.

As it’s not possible to ensure that everyone in the global economy is paid a particular wage the effort is doomed from the start.

The consumer goods giant said it will require its direct suppliers to pay staff a local living wage that allows “workers to participate fully in their communities and help break the cycle of poverty”.

That may be how it starts, to that first level of the supply chain. But that’s not where the demand is going to end - we’ve seen that with boohoo and Leicester. The fashion chain has been critiqued because companies three and five levels down that supply chain might, possibly, have been employing the undocumented on less than the national minimum wage.

The underlying misunderstanding is the old one about the planning of an economy. That from some point we can determine what happens though out the complexity and near chaos of a global economy. Here it’s the payment of a certain income but the same desire has been applied, at times, to output prices, volume and detail of output and so on. All such attempts fail for the same simple reason,.

It’s simply not possible to know, to the required level of detail, what the supply chain is. Because it is all those 7 billion people out there and their interactions. This is not something controllable therefore attempts to control it will fail.

It’s simply not going to work.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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