Hairdressers, Teachers, The Free Market and Government Interference

A few years ago I read a wicked story in the Free Radical magazine entitled Jimmy and the Lemonade Factory - it was about a young boy who wanted to earn himself a bit of pocket money, so he started making lemonade and selling it at the front gate, but got busted by the council for not having a permit, and not having a certificate for preparing food, and planning permission for his stall etc - It was a really great piece of work - I will dig it up and post it here sometime (with credits to the author of course!) ANYWAY, I liked it so much I thought I would have a go at writing one of my own, My effort was actually inspired by government run school teachers going on strike for more wages.

David and André were hairdressing graduates, who on completing their training started work at two separate salons.

David started work for a salon who paid all their stylists the same wage across the board.
André started work for a salon who paid their stylists a basic wage, but with incentives for how many clients they styled in a day, and how many of them made repeat bookings.

David started work only knowing 5 basic styles, but the clients that came to this salon had simple tastes. He cut 5 or maybe 8 clients hair in a day - the less the better as far as he was concerned - he didnt get paid any more for working harder or being able to provide more styles, and he certainly didn’t get any more for chit chatting with the clients - he just did his job, and got them out of there - the quicker the better.

André also started out with the 5 basic styles, but the clients at his salon were more demanding. Nobody wanted the basic old haircut anymore and he struggled to build up a client base, but by attending refresher courses and getting up to date with the latest trends, and fashions, he soon learnt a whole new range of modern styles and techniques, so that no matter who came to the salon, he could do just the right style for them. André was polite and chatted to his clients like they were old friends, offering them refreshments and his specialty - a refreshing scented facial wipe to make them feel relaxed and comfortable, all the while building a rapore and a reputation as a competent and caring professional.

André became so popular with his clients that he couldn't keep up. His boss put his wages and his chargeout rate up to try and ease the load, and put some of the clients off, but when you offer a top service, people are prepared to pay for something they want. Business was so brisk the salon had to employ more staff. However, not just any staff would do as their client base was used to such a high standard of service and expertise that they had to undertake a comprehensive interview system to ensure they employed only the best applicants.

This eased the situation for a short period, but eventually made things worse, as the new stylists were so good at their job, the salons reputation boomed - people were coming from miles around for the best haircuts available in the city.

Meanwhile, David seemed to be getting fewer and fewer clients! The salon was suffering financially - they couldnt afford to buy the latest gels and shampoos or razors etc so had to make do with cheaper, inferior products. This only made matters worse. What were they doing wrong?

Then one day, the hairdressers union demanded all hairdressers get a payrise, regardless of experience or workload. The salon couldn’t absorb this wage increase due to the downturn in business. The hairdressers in the salon were told to go on strike. “It was only fair” they said that they get a payrise - They weren’t doing anything different - they were still cutting hair! It wasn’t their fault business was slow. But things were so bad that the business just couldn’t recover from these demands and was forced into bankruptcy

But help was at hand. Because they employed so many staff, the government gave them a subsidy to keep them going. Now with the backing of government they could really compete in the market, so off they went again. The first thing they did was to slash their prices to attract some of their competitions clientele, because with this big sum of money now behind them, they could afford to run at a loss. Business boomed as it was bound to - after all, few could resist a haircut for $5 that was worth $15 on the normal market. The salon that André worked at was now in trouble - they had to lay off some of the staff they took on when things were booming. In fact they had to lay off some of their other staff also. Last to come, first to go, and André had to be laid off. He was devastated. he had worked so hard to be the best that he could - to strive and achieve excellence, yet this was how he was rewarded. Meanwhile the salon he used to work for was forced to lower its prices to almost cost, yet still they were unable to compete with the other salon in town who was operating at below cost, propped up by a big subsidy.

Down to a skeleton staff, they were barely able to keep the doors open. In the pursuit to compete, they found they had to delete some of their non-essential services like refreshments for the clients, and the ever popular warm scented facial wipes that were so relaxing and comforting.

Even with these stripped down services they were unable to compete, yet it was a well known fact they still had the best hairdressers in town. How had things got so bad?
Finally, unable to actually make a profit and make a living, the salon had to close down, leaving only one salon in town, who just happened to employ, poor staff, offering second rate haircuts, bad service and guess what! - at whatever price they chose to charge - after all - there was no competition anymore.