The IKEA Idea

So, instead of doing my "Accounting for Lawyers" homework, I decided to a little bit of my daily news reading and I came across an interesting article about IKEA. It's not necessarily to follow the link or read about it, but there was a really interesting observation about the company and the Swedish political economy that I hadn't realized:

IKEA is staffed very sparsely, as opposed to say Wal-Mart. There aren't tons of people in the store walking around at all times helping you out, standing around and doing nothing. Furthermore, the products are largely, if not completely unassembled. Most of the products seem to be machine-produced en masse, and the assembly of the products is all done by the consumer.

The reason?

Apparently this model is a necessity of the Swedish socialist economy, which commands very high wages for even the lowest wage workers...such that they simply cannot afford to pay the high cost of labor. Instead, they've designed a business model that requires low levels of constant labor input, whether it's service provided in the stores or menial laborers in the factories. Granted, there must be much higher levels of fixed costs and initial start-up costs, but in the long-run, labor costs will not be a consistent burden on their operating costs. So, in hiking up employment protections through the public sector, the private sector has innovated and adapted to simply do away with employment. Nice.

The obvious broader implication is that the Swedish economy will essentially hemorrhage away domestic industry and manufacturing (I'd be willing to bet that all IKEA products are made in China), and an inevitable loss of competitiveness and reduced growth...especially as Sweden is part of the European Union (which, I assume means that even if they have access to low-wage migrant workers...they can't legally pay them low wages). So it makes you wonder what the future of socialism is...or what it could even conceivably be. I've gotten into this talk many times about how France is equally going to buckle under the weight of competition (a government mandated 35-hour workweek!??!), so this is just a nice concrete demonstration of it in action.

I'm obviously extrapolating from the tiny fragments I've read about Sweden and the beloved IKEA, but I thought it was interesting. It's likely that I've just posted things both enormously obvious and stupid.