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Next Chief Says 'national Living Wage' Could Drive Up Inflation

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http://www.theguardian.com/business/2015/sep/10/next-chief-says-national-living-wage-could-drive-up-inflation

Next’s chief executive, Lord Wolfson, has said George Osborne’s new national living wage will cost the company £27m a year by the end of the decade and risks creating a potentially harmful inflationary loop.

Wolfson, a Conservative peer and friend of the chancellor, said Next would raise prices to offset the cost of implementing the higher pay rate, although the increase could be as little as 1%.

Under the chancellor’s plans, the minimum wage for over-25s will increase from £6.50 an hour at present to £7.20 in April next year, before rising to at least £9 by 2020. Next’s pay rate for adult starters is £7.04.

Wolfson’s comments are the latest in a series from companies about the impact of the new higher pay rate. Whitbread, the owner of Costa Coffee and Premier Inn, has said it will look at “selective” price rises to offset the cost, and the recruiter Manpower said the new rate has sent shockwaves through the labour market.

However I doubt it will increase the low paid purchasing power.

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It’s not as if most people need more clothes. He could always take a pay cut and pay himself this new outrageously high rate of pay if he was really worried about inflation.

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Next would raise prices he says. Their prices are already eye wateringly high and must be up 50% in the past 6years. We stopped buying from them four years ago and other than coats get most of our children's clothes from Sainsbury's. He is under the same delusional spell that the landlords are with the removal of tax relief om mortgages expecting the customer to pay his business costs, ain't going to happen. Customers will move elsewhere.

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My sister use to work for next. Horrible place to work for.

My sister use to refer cloths as Turkish over priced crap. As the otherpost said you can get same from Sainsbury for quarter of price

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"Lord" Wolfson.....who pays himself £4,000,000+ every 365 days.

T0sser running a sh1t business peddling utter crap.

otherwise known as an "entrepreneur"

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a harmful inflationary loop

that is an interesting phrase that makes me wonder about Lord Wolfson's intelligence

does he (a conservative life peer and son of a conservative life peer) not understand that the government is aiming for 2% inflation and, with it currently languishing at 0.1% (CPI) the government needs to find a way of increasing it 20x to achieve its desired target

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I don't think Next is really a shop anymore. Only the online bit is performing well. It is, in reality, a credit provider who happens to use clothes as the preferred method of inventing money.

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Not really. They are increasing the minimum wage to cut the working tax credits down.

Yep. The only people currently on minimum wage who will get a real terms rise are single people without dependents who don't get the state subsidy to corporations passed to them anyway. A very marginal group.

Anyone else will see a corresponding drop in their (employers) 'benefits' to cancel the effect of the rise.

Does anyone seriously expect to see this have knock on effects on those earning anything more than say 25k? I.e. we'll all get a 30% rise in 2020. I don't, but we'll see.

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a harmful inflationary loop

that is an interesting phrase that makes me wonder about Lord Wolfson's intelligence

does he (a conservative life peer and son of a conservative life peer) not understand that the government is aiming for 2% inflation and, with it currently languishing at 0.1% (CPI) the government needs to find a way of increasing it 20x to achieve its desired target

The UK has been suffering from an intractable deflation/disinflation since 2008. The living wage is an obvious (if crude) attempt to address this. In 2011 Wolfson gave the monetarist halfwit Roger Bootle £250,000 for proposing a solution to a parallel problem in the EU, evidently there are other motivations at work here now.

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Guest eight

Next would raise prices he says. Their prices are already eye wateringly high and must be up 50% in the past 6years. We stopped buying from them four years ago and other than coats get most of our children's clothes from Sainsbury's. He is under the same delusional spell that the landlords are with the removal of tax relief om mortgages expecting the customer to pay his business costs, ain't going to happen. Customers will move elsewhere.

The kids clothes in Lidl seem to be both the cheapest and the best quality now.

I love how women are duped by this "layering" meme that comes around every now and then - basically you have to purchase five layers of netting to make one wearable outfit.

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Their prices are already eye wateringly high

It's not the price that is the problem but the value.

The quality of the goods is poor, hence the value is very poor.

Very high price goods can still represent excellent value if the quality is right. Suits from Gieves & Hawkes, for instance, have a high price but are very high quality so represent good value. Shoes from Church's are equally high in price but also represent great value due to the exceptional quality.

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The UK has been suffering from an intractable deflation/disinflation since 2008. The living wage is an obvious (if crude) attempt to address this. In 2011 Wolfson gave the monetarist halfwit Roger Bootle £250,000 for proposing a solution to a parallel problem in the EU, evidently there are other motivations at work here now.

Yep, in a nutshell, this is just a Citizen`s QE/Income Lite IMO, the Next guy understands it, but he is just a mouthpiece to get the idea of "inflation" out there to the sheeple so that thye will fear big inflation but accept the gradual inflation that the puppet masters want? Doubt it will work though, there will just be more deflation and job losses, you can`t replace The Biggest Debt Bubble In The History Of The World with a quid and a half an hour wage rise! There is going to be some form of collapse in the system, stay light, debt free and up-skilled.

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Next is trading on its well known name like a lot of other pricey shops. Maybe they used to be different when they first started out in 1982 but they aren't much different any more.

It can only be the gullibility of shoppers that allows them to get away with it. It's like some of the new shoe shops springing up. You can go to one of them and get a good pair of shoes for a reasonable price or you can go a couple of shops further along (probably identical overheads/identical shop/identical staff - all usually very good) and pay 4 times as much for similar quality and style shoes.

Edited by billybong

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Guest eight

Next is trading on its well known name like a lot of other pricey shops. Maybe they used to be different when they first started out in 1982 but they aren't much different any more.

I find it helpful to have a few pairs of "Next" branded pants around to help me to decide which pair to wear, well, next.

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It's not the price that is the problem but the value.

The quality of the goods is poor, hence the value is very poor.

Very high price goods can still represent excellent value if the quality is right. Suits from Gieves & Hawkes, for instance, have a high price but are very high quality so represent good value. Shoes from Church's are equally high in price but also represent great value due to the exceptional quality.

Clarks shoes are excellent for my children; generally they outlast their tiny growing feet. If hygiene weren't an issue I'd happily pass them down or resell them. We get ~1 years use out of them. Clarks trainers are also very good and comparable in quality to the sports shoe brands. They also get Converse shoes for leisure that are good for ~6months (adult versions are carp and generally last a few months at best so we stopped buying them.

For myself I now buy Dr Martens and they too represent good value as they do last.

The wife has loads of shoes, high end designer types and with the metal heals hold together really well. That said she must wear a different pair every other day so comparably light use.

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Lord Wolfson is correct.

Since minimum wage came in, executive pay has gone off the top of the scale. It enabled large firms to charge more for everything, thus negating the pay "rise". All that happened was that people who didn't get the pay "rise" have to pay more for everything. If minimum wage worked there wouldn't be a need for a living wage. Living wage will enable large firms to charge more again and Wolfson will get more pay. Then later on we will have a survival wage.

(Someone will be along shortly to say I'm wrong, as he always does when I suggest this.... hello again....)

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Wolfson, a Conservative peer and friend of the chancellor, said Next would raise prices to offset the cost of implementing the higher pay rate

So the guy who runs NEXT is currently charging his customers less than the market could bear? Surely this means he is failing to maximize the companies profits and so should be sacked?

If he were competent there would be no way to increase prices since they would already be set at the optimum level re the current market and any attempt to do so would simply result in loss of market share to cheaper competitors.

So- assuming he is doing his job correctly there is in fact no way that Wolfson could raise prices in response to the higher pay rate- his only options are to take the hit or employ less people- however since he will already have optimized his workforce we must assume that he has already cut staff members to the bone.

So in reality the only outcomes are- 1) Less profit is taken out of the company to cover the increased cost of the new wage rate or 2) The company goes bust since it cannot afford to pay it's own workforce a living wage.

Now- any fool could stay in business if the state were subsidizing his workers pay via tax credits- the real trick is to be able to pay your workforce a viable wage without needing state support.

So- In short- what Wolfson is telling us is that he is so incompetent and his company so poorly run that it cannot actually survive without state subsidies in the form of tax credits.

Why are we propping up the failed business models of these clowns in the first place?

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If you look at Morrison's plc,Tesco, home retail (Argos) etc, the story seems to be falling like for like sales and falling margins. I don't really get Next. I probably buy something there once a year and always regret it for the poor quality and high price.

If you want to see even lower quality visit the Next sale?

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Not bought something from Next in years. Been in a couple of times over the past couple of years when I was out browsing for suits and smart "going out" shirts. I soon walked out. Probably spent a similar amount of money but on better quality.

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Lord Wolfson is correct.

Since minimum wage came in, executive pay has gone off the top of the scale. It enabled large firms to charge more for everything, thus negating the pay "rise". All that happened was that people who didn't get the pay "rise" have to pay more for everything. If minimum wage worked there wouldn't be a need for a living wage. Living wage will enable large firms to charge more again and Wolfson will get more pay. Then later on we will have a survival wage.

(Someone will be along shortly to say I'm wrong, as he always does when I suggest this.... hello again....)

Not to mention that rents will go up to capture the extra spending power. Raising the general standard of living is essentially impossible so long as we have rentier economy.

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Lord Wolfson is correct.

Since minimum wage came in, executive pay has gone off the top of the scale. It enabled large firms to charge more for everything, thus negating the pay "rise". All that happened was that people who didn't get the pay "rise" have to pay more for everything. If minimum wage worked there wouldn't be a need for a living wage. Living wage will enable large firms to charge more again and Wolfson will get more pay. Then later on we will have a survival wage.

(Someone will be along shortly to say I'm wrong, as he always does when I suggest this.... hello again....)

I appreciate your overall point. However the wealth began consolidating away from the productive to the execs after 1979. exec pay was already soaring well before nmw. The tail doesn't wag the dog.

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