Deliveroo Britain

Undevelopment with unlimited supplies of labour

‘Jean-Luc Mélenchon tells us that migrants are the engineers of tomorrow, the researchers of tomorrow. I believe that the vast majority of them are rather the dealers of tomorrow, the bac moins dix [those with the intelligence of a seven year-old] of tomorrow, the Deliveroo drivers of tomorrow’ —Eric Zemmour, 2023

A sudden increase in the supply of labour, regardless of whether it is sourced wholly domestically, imported from elsewhere, or employed offshore, can dramatically alter the logic of production. We can generally expect that in response, new labour-intensive industries will spring up; capital-intensive ones may die off.

As Thdhmo and JUICE8882 have both recently demonstrated in the pages of this very journal, immigration is not actually good for the economy as a whole. But we must remember that this certainly doesn’t mean that it cannot be good for the shareholders and management of some industries. Immigration is, in effect, a subsidy for all low-wage, labour-intensive businesses, which in Britain do not bear the full costs of the workers they employ — workers who (alongside their ‘dependents’) are heavily subsidised both directly and indirectly, and who also often have major negative externalities (such as increased crime) that are borne by the general public. But even without subsidies, labour-intensive businesses will in effect be given a competitive edge over their capital-intensive competitors.

In some ways, the politics of immigration since the introduction of the so-called ‘Australian-style points system’ has resembled the historical politics of tariffs, as industry lobbyist after industry lobbyist lines up to try and carve out their own special set of privileges and exemptions. This is most obvious when it comes to the farmers and the universities, but florists and takeaway managers have also somehow managed to find themselves on the list of ‘skilled’ occupations. It seems to be at least partly for this reason that at the peak of its power, Britain chose to almost entirely forgo tariffs: special pleading is tiresome. Perhaps it is time to do the same with immigration by smashing the visa printers.

A robotic, automated future is not inevitable: in The Shock of the Old (2006), David Edgerton writes of how the highly-capitalised, labour-saving shipbreaking industry in Taiwan was annihilated in a matter of years by subcontinental competition that employed small armies of men armed with little more than crowbars and hacksaws. One prominent theory for why the Industrial Revolution occurred in Britain argues that it was, in part, due to eighteenth-century England combining unusually cheap capital (and energy) with unusually expensive labour. And in 2019, left-wing Chilean economist José Gabriel Palma substantially blamed poor productivity growth in Chile over the previous two decades on an ‘active policy of mass immigration’ — i.e., a policy that was ‘not [directly in response to] political disturbances in neighbouring countries’, with Peruvian and Venezuelan immigrants simply flying into Santiago (no visa requirements) and disappearing into the grey economy. This occurred just as Chile began ‘running out of cheap labour’, and incumbent economic elites desired a cooling of the labour market as an alternative to increased savings and investment. From this, elites would also have more of an ‘exit strategy’, as their wealth would be more liquid and less immobile, less inherently geographically tied to Chile through their ownership of fixed capital like machinery.

The effect of cheap labour abroad on global supply chains is already well-known, and for better or for worse, short of hiking tariffs — mostly impossible as a member of the WTO — there is rather little we can do about it. Various ‘post-liberals’, ‘populists’, and ‘economic nationalists’ have already explored this element of a globalised labour market in great detail.

But in this article, we will instead look closer to home: how has the post-1997 labour supply shock of mass migration affected the domestic economy?

In his famous 1954 article ‘Economic Development with Unlimited Supplies of Labour’, Saint Lucian economist W. Arthur Lewis wrote of the character of an economy where there is a de facto ‘unlimited supply of labour’ at subsistence wages (or close); in these countries, ‘the marginal productivity of labour is negligible [or] zero’. Writing of the West Indies, and of countries like Egypt or India, he paints a picture that will be familiar to anyone who has spent any time in third world countries:

Several writers have drawn attention to the existence of such ‘disguised’ unemployment in the agricultural sector… The phenomenon is not, however, by any means confined to the countryside. Another large sector to which it applies is the whole range of casual jobs — the workers on the docks, the young men who rush forward asking to carry your bag as you appear, the jobbing gardener, and the like. These occupations usually have a multiple of the number they need, each of them earning very small sums from occasional employment… Petty retail trading is also exactly of this type; it is enormously expanded in overpopulated economies; each trader makes only a few sales; markets are crowded with stalls… domestic service… is usually even more inflated in overpopulated countries than is petty trading (in Barbados 16 percent of the population is in domestic service)… Most businesses in underdeveloped countries employ a large number of ‘messengers’, whose contribution is almost negligible; you see them sitting outside office doors, or hanging around in the courtyard…

With Lewis’ help, we can now begin to make some predictions about the likely effects of mass migration on a developed economy like Britain:

1. Long-gone economic sectors — which typically disappeared due to a high prevailing rate for unskilled labour combining with low potential profits and very high costs of automation — will, seemingly inexplicably, be abruptly brought back from the dead.

2. Premodern production methods will gradually replace machines, as highly-capitalised businesses are outcompeted by de facto subsidised labour-intensive businesses.

3. The masses will compete for various ‘casual jobs’ at subsistence wages (or close) — now with apps! — and some of these jobs will have previously barely existed in Britain, or at least not since the Great War.

4. Lots of people, especially the uneducated, will be seen to be visibly idle, or at least obviously underemployed and underutilised; many, rather than being employed full-time, will do whatever work happens to come their way, spending the rest of their time ‘milling around’ in public spaces.

5. The savings rate will decline, as economic elites choose to sweat labour, spreading existing capital thin, accumulating maximally liquid and mobile wealth, and engaging in prodigious consumption, rather than undertaking risky (and self-denying) capital accumulation.

In short: Modern Britain will become perhaps the world’s first concrete case of economic undevelopment with unlimited supplies of labour.

One obvious, concrete example of the newfound strength of the premodern economic sector in Britain is the disappearance of machine car washes. Ubiquitous in my childhood, they have been outcompeted and replaced by shady Albanians who do everything by hand. I have been told that hand-washing cars is superior anyway, but a similar logic would dictate that we must still have shoeshine boys on every street corner. Some economic services — even those that cannot necessarily be automated away — will naturally decline or die out as the economy grows, wages and prices rise, and people find more productive things to do with their time and new things to spend their money on.

In other cases, the labour supply shock has, defying economic logic, seemingly created its own (usually state-led) demand: consider the otherwise inexplicable number of people now paid to stand around doing nothing at Central London train stations, or to pointlessly shout at you to ‘STAND BEHIND DE YELLOW LINE’, or bellowing ‘HOLD DE HANDRAIL’ — presumably jobs invented by the government to provide ‘gainful employment’ to the burgeoning surplus population, much of which (we are told) was supposedly imported ‘for the economy’.

But perhaps the most notable invention of mass migration has been the delivery app — in Britain, the ‘big three’ apps being Deliveroo, Uber Eats, and Just Eat. Much like Uber itself, all three have obtained vast sums of money from investors by masquerading as ‘technology’ companies. In fact, other than possessing a (seemingly) easily scaleable online platform, they are nothing of the sort, having far more in common with the capital-light, labour-intensive third world sweatshop than with a Google or a Facebook.

Go to any major town or city, and you will see throngs of drivers in their bright uniforms and backpacks outside every other chain restaurant, with their numbers reaching an inevitable peak outside the local McDonald’s. It is not a pleasant sight. It is a job that is, by all accounts, extremely poorly paid. A spate of sympathetic articles in The Guardian and other left-wing outlets have implored their readers to look out for these unfortunates, who mostly (legitimately!) struggle to make ends meet, especially if they are illegal immigrants and cannot easily claim benefits. It is perhaps not surprising that it is widely rumoured that some are also ferrying drugs around the capital on the side to earn a little extra. But if it is so bad, why do so many people — mostly not fleeing anything but a bad economy — stay here rather than just going home?

The truth is that even Deliveroo pays far more than most jobs in Nigeria or Bangladesh, and as such the potential supply of labour for Deliveroo with an open door to immigration is nearly infinite. And this is even before we consider free healthcare and the other in-kind and cash benefits available in Britain. Don’t feel too sorry for them.

As an aside, next time you order from one of these apps, pay close attention to the actual identity of the driver versus their claimed identity on the app. Increasingly — especially in London — it appears that illegal immigrants use (or perhaps steal?) the identity of someone who is actually cleared to work in Britain (presumably with a small fee) in order to pass the rudimentary checks required by the companies. Make no mistake: despite being listed companies, these apps are clearly amongst the worst in Britain when it comes to exploiting illegal labour. For this they have seemingly faced zero consequences. And this is a country that, lacking identity cards or any real checks whatsoever to prevent visa overstayers — and with only a very remote possibility of deportation (even for those who commit crimes) — is perhaps the closest thing in the developed world to a paradise for those illegal immigrants who do manage get across the Channel. This is, of course, on top of an equally insatiable demand for legal unskilled labour, which is amply provided by our enormously high levels of immigration from the third world.

In fact, some third world immigrants seem to display an outright preference for the flexible, ‘on-again, off-again’ work of the gig economy to that of a more regimented 9-5 (which often objectively pays more); it’s more social, more similar to work back home, and they can spend some time milling around or loudly calling their family and friends on the phone whenever they feel like it. In this respect, Britain’s gig economy means that work created by these apps even more closely resembles Lewis’ depiction of a backwards economy with ‘unlimited supplies of labour’. Another David Cameron policy triumph.

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It is important to note that even with gigantic implicit subsidies via immigration, not one delivery service has ever reported anything more than the slimmest of quarterly profits, even in the depths of the pandemic when the country was (in effect) forced to use their services. These are business models that are clearly untenable without staggering levels of immigration. In fact, enormous losses are far more typical than profits. Deliveroo lost £290 million in 2021, and £245 million in 2022, although losses have narrowed to £83 million in the first half of 2023. Uber Eats admits that ‘historically’ it has typically paid drivers out of pocket more than the delivery fees charged to customers on the app, and lost billions doing so. Just Eat lost €4.6 billion due to impairment losses following the ill-fated acquisition of America’s Grubhub, and reported another €1 billion of losses on top of this in 2022 alone. All have become experts in presenting their own metrics that depart from GAAP to try to explain themselves to their investors; Uber, the owner of Uber Eats, who have burned $31.5 billion of investor cash since their founding, are amongst the most innovative in this regard.

In order to try to make money from what seems to be an inherently flawed business model, these companies inevitably have to squeeze someone. They have shown themselves to always be very wary of ever squeezing the apparently highly cost-sensitive customer, which leaves only the drivers and the restaurants. To state the obvious, they are already squeezing the drivers, who are basically at as close to subsistence wages as is possible in a developed economy: even with mass migration, and with many drivers living eighteen to a room in illegal sublets, it is difficult to imagine fees for drivers falling much lower. One American video on YouTube shows a driver being offered $3 by Uber Eats to drive seven miles in suburban Georgia. Petrol prices have also risen significantly over the last two years, and some companies — such as America’s DoorDash — have sought to shield their customers from these increased costs by directly subsidising drivers.

As such, the companies have been forced to turn to the restaurants, who now fork over as much as a third of the value of the food orders they receive from the app. In response, restaurants (facing their own tsunami of spiralling rent, food, and energy costs) have hiked prices — first in the restaurant, and then by even more on the app. Major chain restaurants, such as McDonald’s, can also threaten to pull out of the app entirely in response in an attempt to force the delivery company to sign exclusive contracts that give them special privileges over the rest. The root cause of this vicious struggle is that even in ideal conditions — extreme mass migration, even a pandemic — customers are flaky. If costs were higher, as they would be in a low-immigration environment, these food delivery companies would be bankrupt.

This becomes even clearer when you consider the basic economics lurking behind some these apps. Deliveroo Plus is a subscription service that provides completely ‘free’ deliveries for £7.99 per month. The idea is that a subscription will snare customers, increasing their order volume and making them more loyal to a single app. Deliveroo still gets their cut from the restaurants, but with such slim margins it seems difficult to imagine how this could be profitable. In fact, the man behind Plus outright admits that Deliveroo’s subscription service was apparently never designed with profitability in mind. He claims that Plus is now ‘sustainable’, but with the loss of a (typical) £2+ delivery fee, this means that if you order morning coffee and then your dinner in every day, you will recover your monthly cost in two days, which surely cannot be good business in an industry with such slim margins. If you happen to have the money to spend this much on food and drink, I would recommend making use of this deal while you can, as I assume their foolish investors will eventually pull their money from this cash bonfire.

Other equally absurd deals have also appeared. With such high competition and low barriers to entry, and with customers so cost-sensitive, customer acquisition costs are expensive. In order to try to capture more market share — the hope presumably being that they can put their rivals out of business, somehow establish a monopoly in spite of low barriers to entry, and then hike prices — Deliveroo at one point offered a deal: free grocery delivery, but only with another order. Seems normal enough. But instead of sending their driver first to the restaurant, and then to the supermarket, they instead directed an entirely separate driver to perform the second order.

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We are often told that we need to learn to live with less; we’re in a ‘climate emergency’, after all. Normally, I would not agree, but such a mentality does have some valuable lessons for us here. British citizens will need to accept that a low-immigration Britain will probably put Deliveroo out of business; it will reduce the Pret density in Central London by thirty percent; there will be no more Albanians to wash your car by hand. In exchange, we will be able to cut your taxes; you will be more easily able to afford a house (and less of our Green-and-Pleasant Land will be paved over); crime rates will decrease. The British Lion will roar once more. But certain business models will be gone, and they won’t be coming back. Some of this work will eventually be automated, but some of it will most likely not. Other services will still be available in their current form, but at dramatically higher prices: perhaps the market rate for the delivery fee for each order will stabilise at £8 or so — good enough for those wealthy enough to afford it, or as an occasional luxury, but unaffordable as a regular thing for the ordinary person.

It is genuinely aristocratic to expect your food — or more absurd still, your coffee — to be fetched for you on the regular; far, far more so than the much more popular examples of ‘unsustainable’ consumption that simply make use of technology that is already there to fly cheaply to a sunnier climate, or to drive an unnecessarily massive petrol-guzzling SUV. Food delivery is clearly the sort of ‘industry’ that, short of autonomous drones or self-driving cars, absolutely requires a class of semi-enslaved foreign labour on near-subsistence wages for it to be financially in reach for all but a small minority. In response, some might say that we should adopt the Singaporean or Gulf approach to immigration, where guest workers have no rights and can be hired and fired (and then deported) at will. I personally strongly disagree, but this is not what is on offer in the first case — and I suspect is also not what is wanted by the British people, who are rather mushy at the best of times — so is a moot point.

This is not a Wholesome Chungus post-liberal publication that somehow finds virtue in personally performing tedious household chores, like cooking, cleaning, and laundry — we put up with this drudgery because we have to. Nonetheless, there is still a pretension that needs to be called out for what it is: Maisie, you will have to work at Goldman Sachs or Slaughter and May to afford this kind of lifestyle from now on. Your £23k p/a ‘digital marketing’ job isn’t going to cut it, especially with the rent on your Clapham houseshare going up by double digits. And perhaps it’s for the better; you’ve been putting on the pounds since you started working, and Deliveroo wasn’t helping one bit.