“Please limit the number of my competitors”

There is often quite some competition for the oddest story in newspaper  (this morning, in the Dominion-Post, it was surely the little piece telling readers that the Mormons were pulling 21 missionaries out of Liberia –  not, it appeared, because they had been kidnapped to threatened but because Liberia’s economy was proving pretty dysfunctional).

In Saturday’s Herald I reckon it was a big feature article in the business section calling for the Auckland Council to cap the number of restaurants/cafes, at least in “certain areas” of Auckland.  Perhaps the oddest thing about the whole substantial article was that it was mostly built off the complaints of one owner, Renee Coulter of Coco’s Cantina, who is quoted at length.  Such a cap would, she says, ease “pressures around staffing and fierce competition”, which would no doubt be in her own interest (but not, one assumes, those potential staff owners are competing for) but she offers not the slightest hint as to how such restrictions –  less competition, as she says –  might be in the wider public interest (and there is no sign that journalist pushed her on the point).  Coulter reckons that if you want to enter the industry you should have to buy an existing establishment.

“There’s too many dining establishments, and that’s not me being a big cry baby”, or so she says but it sounds a lot like it.

The article goes on to quote her claiming that “it’s competitive to the point where people aren’t actualy making money, they are just staying trading so that they don’t go under”

But if that were an accurate description –  and it must surely be considerably exaggerated – the market has its own mechanisms: eventually, people will go out of business, and those with the best business models for the current market will survive.

Now don’t get me wrong.   As someone who doesn’t eat out that much –  five adult appetites gets expensive no matter how competitive the market, and anyway I like cooking –  I’m always surprised quite how many restaurants and cafes there are. I walked through Newtown this morning –  for non-Wellingtonians, a funny mixed sort of suburb with lots of council housing but also absurdly expensive (mostly) small houses, a couple of hospitals and a university just down the road –  and counted, quite literally, dozens of eating places, none particularly fancy, some new and some which have been there for decades.  I don’t know how they all survive, but I don’t need to: the owners make that assessment, day by day, and there is no obvious need, or public policy interest, in councils getting involved.

The Herald’s reporter managed to find one other owner to offer half-hearted support to Ms Coulter, but even then Krishna Botica (who owns a couple of outlets) said

“Certainly I think it is worth looking into, whether they could come up with something that was accurate and fair, I think there is a larger question mark over that.”

Among other problems, indeed.

But Botica does add some other complaints.  Apparently “everybody who lives in Auckland..finds it hard to keep with all the new eateries”, claiming that everyone rushes around all of which is “giving restaurants a very limited time to develop relationships”.

One can see that that might be challenging for business owners.  But it is their problem, not ours, not the Council’s.

Botica goes on to complain that business has become too “transactional” which means apparently “survival of the fittest”.  Or, on Ms Coulter’s telling, survival of zombie businesses that are making no money?   Either way, it just isn’t obvious why it is anyone’s problem other than the owners (and perhaps their immediate families).   A restaurant just isn’t one of those entities –  unlike, say, a life insurance company – that one really needs to know will still be around 30 years hence.

The Herald did go one better than just two somewhat aggrieved struggling (?) restaurant owners.   They tried to talk to the Council, who quite rightly pointed out that they had no legal powers in the matter (that’s good).  And then they went to the Hospitality Association.  The chair of that grouping didn’t support the idea of capping licence numbers, but he went one better in his calls, claiming that New Zealand needs to have a Minister of Hospitality.  To the extent that there is such a function at all at present, it is all under the wing of the Minister of Tourism but (according to Botica, the restaurant owner) “you can not lump them together anymore” given the size and attention they both need.     The mind boggles, wondering quite how much government attention –  food safety aside –  these people think their restaurants and cafes really need.  Then again, government’s set a dreadful lead with all the identity or industry-serving ministers they do create (be it Tourism, Women, Pacific Peoples, Ethnic Affairs, Racing, MPI or whatever).

The Herald also talked to the Restaurant Association, who seemed to represent a rather divided membership, noting that “competition can be a good thing and those managing their business well will come out on top” so “whilst we continue to monitor the idea of a cap, we are mindful of the potential limits this could put on creating valid opportunities for new owners”.

Normally, one might suppose that when there was a severe shortage of staff –  as those quoted in this article claim –  wages for those types of people would rise, perhaps quite a lot.  And if that, in turn, left some business unable to operate profitably, those less profitable operators would leave the market.    It is how resources are reallocated in a competitive market

But that doesn’t appear to be what these operators have in mind at all.  Not once in the entire article is there any reference to (relative) wages rising sharply.   No data are cited suggestig they are.   Instead, we get the plaintive calls for more cheap migrant labour.    Now I might even concede some sympathy with them around MBIE processing times –  the stories you hear really should shame a first world country that likes to boast of its good government, responsive services etc –  but the idea that governments should be, in effect, capping wages in particular sectors, in effect subsidising operators in thoese sectors, by allowing in ever more migrant labourers, typically with low reservation wages, really should be anathema.

But there is the thrust of the case: push for councils to cap the number of restaurant and cafe licences to reduce competition and choice for the public, all while pushing central government to impose more competition on lower-end New Zealand workers, or squeezing them out of the sector altogether, in favour of cheaper foreigners, temporary or permanent.   Wouldn’t life be sweet for the less-than-best operators if somehow government and council were to accede to their calls?

The thing I found remarkable about the article –  and it was quite a substantial piece, not a five line snippet –  was that there was no sign that the journalist had made effort (or bosses insisted) to get a perspective from anyone who might have other interests at heart.  Consumer groups for example, or even an economist specialising in competition and regulation.  It was as if it was producer (firm) interests that mattered, not consumers (or even workers), even though –  presumably even among readers of the Herald business pages there must be more consumers (that’s all of us) than firm owners.    There will always be industry voices calling for reductions in competition –  that is in the (at least temporary) interests of the incumbents  Governments are supposed to be there for the wider public interests, and –  temptations to be too close to business notwithstanding – you’d hope that major media outlets would at least want to sure that the wider public interest was represented when they allow their pages to be used to promote campaigns to limit competition and make life easier for business operators.

(Since I  get commenters bagging the Herald more generally, I might take this opportunity to point out the stark contrast in today’s papers between the Dominion-Post (and, I assume, other Stuff outlets) and the Herald coverage of the economic/trade effects of the coronavirus and the various restrictions in place, in China and abroad.  The Herald’s coverage is head-and-shoulders better –  although even it has important omissions –  than the Dominion-Post , and the latter (despite its large public service readership) doesn’t even compensate by superioru isight on the political/bureaucratic machinations.   Issues like whether our Foreign Minister really told the Chinese Foreign Minister on Saturday that we were imposing no restrictions, only for the government to adopt the diametrically opposite policy in announcements the following day.)

 

14 thoughts on ““Please limit the number of my competitors”

    • I have argued previously that the significant increase in statutory minimum pay benefits cheap migrant labour but comes at the expense of Kiwi business owners. Restaurant owners are not the only ones feeling the pain.

      “Laura Fergusson Rehabilitation, which has offered care to thousands of New Zealanders with disabilities and those affected by strokes, brain and spinal injuries, is shutting down due to lack of funding.

      The much-lauded 2017 pay equity settlement was one contributor to Laura Fergusson Rehabilitation’s demise, McLeish said.

      The settlement saw care and support workers’ wages increase significantly after it was argued the caregivers, who are mostly female, were being paid less than a male with the same skills in other industries.

      “For the most part, the government adjusted funding to cover the cost of pay equity, she said, but it was the knock-on effect that had caused financial trouble. The shortfall is we’ve had to adjust our other staff salaries to get the relativity.”

      https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018732252/nz-disability-rehab-centre-closure-worries-clients-i-don-t-know-where-i-ll-go

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  1. Yeah, all countries should let anyone from anywhere buy residential housing… that’s survival of the fittest (i.e. wealthiest)… as long as the propertied class don’t become hypocrites when the local underclass rises up and starts murdering them 😉 Survival of the fittest!

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    • That’s why we fork over $400 million in social welfare payments a year plus a gift of NZ publicly owned land towards the Maori underclass as part of a Treaty of Waitangi race based social welfare payments. It is the price of peace.

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  2. More cheap migrant labour has become the standard request from businesses these days. Meanwhile our party leaders assure us that only the skilled are allowed in.

    As for reporting, it seems that only showing one side is becoming the standard these days. I do wonder if this is simply because it creates sides. One group agrees, the other disagrees, thereby creating the ever more elusive click.

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    • You can’t service a $16 billion dollar tourist and international student industry with PHD engineers. Highly skilled means great shop assistants and waiters. A restaurant would rate a PHD engineer as low skilled. All relative.

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  3. Bit of a whine fest in the Herald then… no surprise… they are after all best at dog whistle type articles… My view is ‘screw ’em’… either sell a product people are interested in and want to buy, or bugger off.

    The average life expectancy of a restaurant is pretty short no matter what the state of competition. As you rightly point out, no one HAS to go out to dine…

    if all Ms Coutler has to offer is a whinge fest then I’m not going to take my business to her establishment…

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  4. The technical term is “commoditisation” – read the differentiation between a commodity and a product – low cost food ie fast food take-away’s followed by low cost intermediate sit-down and take-away asian eateries and high-end dining establishments. As time goes by and more and more low-end and mid-tier eateries appear they simply commoditise the “product” with no promotable features – they’re all the same and slowly they drag the high-end eateries down to a commodity level

    There have been a few articles recently on how Uber-eats have killed of a lot of the mid-tier diners (along Ponsonby Road) who have had to shut their doors and now service only Uber-Eats, no longer providing sit-down services

    It’s a product of over-immigration

    Dominion Road 7 km’s along Mt Eden through Valley Road, Balmoral to Mt Roskill is now wall-to-wall Indian and Chinese outfits – would anyone try and set up a high-end restaurant in the midst of that – highly unlikely. In fact it would be high risk given Twyford’s Light Rail toy-train is going to destroy all that

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    • I can’t see Twyford’s light rail given the light of day. Dominion road is only jammed up whenever they close off the Waterview connection if there is an accident. Traffic is then diverted from the West into Dominion Road which then jams up the entire Mt Roskill suburbs.

      In normal traffic it takes less than 10 minutes to drive from the Mt Roskill end to the Mt Eden city end because the population density is far too low, for any rail to be cost effective.

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  5. Obviously the Herald reporting is so poor as to be laughable, and Coco’s proves that some businesses will ‘make it’ for a while, despite their owners.

    But I can never quite get my head around the balancing the right settings with many sectors like these. Are we just too far down the track of having given effective subsidies to a large number of industries, or having been dishonest about the distributional consequences of free-ing trade but without some equivalent in labour?

    Down in Otago, for example, there are constant laments about fruit or grapes rotting on the ground or vine. We go and get Samoans and so on, because apparently New Zealand workers “aren’t interested”, “don’t have a good work ethic for it”, etc. Having done some of this work back can’t help but think the pay and conditions are just too low/poor. But if remedying that put the orchard’s costs up to some point where it struggled to compete with Chilean stuff (or whatever), then difficulties start to come up.

    Who can think of better things to do with the land? Some might be tempted to put houses all over it, but one thing we see down here is that even when folks do this, the houses are still so expensive we start seeing things like fewer of the staff serving us in the coffee shop – who might ordinarily live at least vaguely nearby – being able to afford to be there to make our coffees. So we get German backpackers in for that, or folks driving 90 minutes each way daily for the pleasure.

    And if the land stays out of housing due to some regulatory restriction, common around here, we find the orcharder or farmer complaining that no one domestic will buy it for a fair price, so we get the OIO to rubber-stamp a US high-net-worth individual’s offer. And then they’ll make sure we can’t easily get on the conservation estate out the back.

    Tounge-in-cheek/stylised/quite probably displaying some lack of understanding, sure. But one kind of suspects that this might show us a lot: To me it looks like the exchange rate has got to be too high – I don’t know what to do about that; It also looks like even niche primary product export is really good enough productivity-wise, not to mention making coffees or providing hotels and thrills – we need to find a way to participate in the aerospace or biomedical industry or something; And it looks like unregulated land markets may not always be a panacea, and may in time and in significantly large areas imply sovereignty-type issues.

    Welcome any thoughts. Thanks.

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