Philadelphia soda tax leads to layoffs at Pepsi
That new administration in Philadelphia under Mayor Jim Kenney has certainly been busy so far. One thing they managed to do was to help “save the people from themselves” by passing a restrictive new soda tax. Ostensibly pushed forward as a health initiative, what it really did was jack up the cost of a product which many people enjoy to the point where the poorest residents could no longer afford to purchase it as often. I’m sure you will be completely surprised to find out that this affected sales of the beverages in a negative fashion for manufacturers and distributors. And what happens when you do that? People get laid off. (Philly.com)
With sales slumping because of the new Philadelphia sweetened beverage tax, Pepsi said Wednesday that it will lay off 80 to 100 workers at three distribution plants that serve the city.
The company, which employs 423 people in the city, sent out notices Wednesday and said the layoffs would be spread over the next few months. The layoffs come in response to the beverage tax, which has cut sales by 40 percent in the city, PepsiCo Inc. spokesman Dave DeCecco said.
“Unfortunately, after careful consideration of the economic realities created by the recently enacted beverage tax, we have been forced to give notice that we intend to eliminate 80 to 100 positions, including frontline and supervisory roles,” DeCecco said.
100 or so jobs in a metropolis the size of the City of Brotherly Love isn’t really all that much, but it of course ignited an immediate firestorm in the political arena. For their part, Pepsi is insisting that they are simply responding to market changes as every business does. The Kenney administration however, claims that this is some sort of insidious plot intended to twist the arms of the legislature and City Hall.
Does anyone in the mayor’s office understand how completely insane this conspiracy theory sounds? Businesses operate strictly on a profit driven basis. What management team in their right mind would lay off a quarter of their workforce if they still had deliveries to make and commitments not only to their shareholders but to their distributors, just to score some political points?
The city made a decision to tax these products at a crazy rate. Sales are down and that is something which is easily documented. I suppose you could try to pretend that those two facts are unrelated, but if you fail to offer an alternate explanation then you are taking a deep dive into fantasyland. I’m also intrigued by the “defense” of the tax being put forward by City Hall. They are pointing to the national profits taken in by Pepsi and claiming that those figures somehow prove that the company did not need to lay off these workers. Again, does anyone in Jim Kenney’s office read this stuff before it goes out?
“The soda industry sunk to a new low today,” city spokeswoman Lauren Hitt said. “They are literally holding hostage the jobs of hard-working people in their battle to overturn the tax. Pepsi reported nearly $35 billion in gross income and $6 billion in profit last year…. The idea that they can afford to do that but ‘must lay off workers’ should make every Philadelphian very skeptical of whether these layoffs are actually due to the tax.”
There is one rule of thumb in the world of American capitalism regarding corporate profits. Whatever the number happens to be is always going to be lower than what they would like it to be. That’s kind of how business works. If the Philadelphia branch is failing to meet their sales goals and does not need as many people to get the available work done, the fact that they made a profit last year is not justification for keeping people on the payroll when they have an insufficient amount of work to do.
This entire, sad episode is a sterling example of liberalism in action and what happens when these political theorists are allowed to place their thumb on the scale of the free market. No matter how “well intended” the soda tax may have been, the real world consequences were both predictable and inevitable. Now the chickens have come home to roost and Mayor Kenney is invited to go explain the results to the public.