Plans by multinational food processing company Greencore to recruit overseas for the workers to staff a new sandwich making factory in Northampton provoked more questions than answers last week, not least the Daily Mail headline "Is there no one left in Britain who can make a sandwich?" Of the 8,000 people unemployed in the city, it seemed safe to assume that enough of them probably could.
One question not asked, however, is whether that would be a good use of their energy and time. After all, commercial sandwich making displaces, rather than creates, economic activity. People have to eat, and the maximum value comes from eating the right combination and quantity of food to stay satisfied and healthy. It is to be hoped that people eating Greencore's sandwiches have chosen them in preference to something else, rather than merely eating more. For the economy as a whole, therefore, its a zero sum game.
Of £3 spent on a sandwich in a supermarket, typically about £1 goes to the shop, with something for the lorry and driver to get it there, something for the factory workers, something for Greencore's management and overheads, something for its shareholders, something (hopefully) for the taxman and something for the sandwiches that go out of date and get thrown away. Whatever's left pays for the ingredients (included in which is the price of getting the ingredients to the factory in the first place). If it's is as much as a quarter of the shop price, on average, it would be a surprise.
Constructing a homemade sandwich, therefore, saves £2.25 for five minute's work. That's £27 per hour out of taxed income, or over £90,000 a year gross for a higher rate taxpayer. At that rate it's safe to assume that most people aren't buying shop sandwiches because their time is too valuable. 99% of us would be much better off taking five minutes unpaid leave from our work.
People buy sandwiches because it is convenient. When amounts are small they may not notice the price of that convenience, which suggests that this spending comes out of cash they don't otherwise need. Cumulatively, however, the sums are considerable: £2.25 each working day is about £750 a year of gross income for a basic rate taxpayer - enough to pay for a week and a half of extra time off at the median hourly wage.
In macroeconomic terms the function of a sandwich factory is to keep people working to pay for their sandwiches, thus recycling their surplus cash towards people who need it. In political parlance it "creates jobs", which allow people to participate in the economy who otherwise would not. That model is vulnerable, however, when the labour market can so easily expand. If the factory pulls in new workers, rather than using the ones who are already in the country, the problem gets worse, not better. Low paid workers receive state benefits as well as the unemployed, so the immediate cost to society goes up, not down.
Whether a sandwich factory is ultimately a cost or a benefit to society depends on how you measure it. GDP rises when more sandwiches, or more expensive sandwiches, are sold. Company profitability should also improve, creating the impression that "UKplc" has done well out of this investment. But something is still missing. Work that people would gain £27 an hour for if they did it themselves is generating a string of jobs that pay far too little to sustain life. Could that money be put to better use?
According to the British Sandwich Association, the U.K. market for bought sandwiches is worth £7.25 billion. If a quarter of that is ingredients, that leaves £5.5 billion, a sum that would go a long way towards meeting the additional funding that the NHS is said to require over the next five years. People buy, on average, about one sandwich each every week. If everyone made that extra sandwich, might that save the NHS?
Arguably, it could, but not in the obvious way of channeling more cash into its coffers. The time people spend making their own sandwiches is the best-paid five minutes of their day because it is totally productive, unburdened by overheads such as premises, shareholder profit, manufacturing plant, professional advisors, corporate management, transport, packaging, advertising and marketing costs.
This principle applies to many things, including healthcare. The biggest challenge facing the NHS is not a shortage of doctors or expensive kit, but long term conditions arising from old age and lifestyle factors such as poor diet, stress and smoking related illness. Many of these are related to poverty and/or over-work. It would be far more cost effective to buy people time to look after themselves better and take care of each other than for them to stress themselves out earning money to pay taxes to pay the NHS to do it for them.
Instead of struggling to find new jobs for all those redundant sandwich makers, therefore, the most beneficial solution is to spread the extra free time around the working population to improve the quality of their health and lives. To achieve this, two things are needed. The first is to move on from the idea of benefits as charity to the economically inactive. In their place should come a form of universal, basic wage that acknowledges everybody's capacity to contribute, whether paid or not. The second is to measure the value of the unpaid work that promotes human wellbeing - to condemn GDP to the museum of mid-20th century curiosities and replace it with something that prioritises the human value of all work and activity. For this, the Genuine Progress Indicator is a good place to start.