By Barret Kupelian
PARLIAMENT’S vote to restrict Sunday trading hours is wrong as it was based on hearsay.
If signed into law, the overwhelming body of scientific evidence points out will lead to higher unemployment, reduce competition in the retail market and, ultimately, push more businesses to the brink.
Last time I checked, this is exactly what Parliament didn’t want.
To set into context, on May 7, Parliament voted through legislation, which, among other things sets limits to Sunday trading hours in areas which do not fall in arbitrarily defined tourist zones. This reversed official government policy which first came to force in July 2013, via the minister’s executive order, right after the Cyprus bailout.
The premise of the parties which voted for the bill, was based on three main assertions. First, liberalising Sunday trading hours will hurt the retail sector. Second, that there is no real demand for shopping on Sundays, and third, a more liberal attitude to trading hours will lead to job losses.
Focusing on the last point, one party official used the adjective “naïve” to describe all those who thought relaxing Sunday trading hours would lead to a drop in the unemployment rate.
So who really is naïve? This article looks at whether economic data tallies with the three most commonly used points for regulating hours in the retail sector.
Myth Number 1: Liberal trading hours will hurt the retail sector
The chart below looks at two widely used measures of retail sales. I’ve focused on trends since the second quarter of 2013, which is when trading hours were liberalised and the latest data point used is the fourth quarter of 2014. The figures have been deflated, and therefore control for inflation and are seasonally adjusted.
The evidence is clear as the data shows that retail sales of non-food products (excluding fuel) have grown by around 7% since the second quarter of 2013. A similar, though less strong trend, can also be seen in retail sales of food beverages and tobacco, which also grew, albeit at a slower rate, by 1%.
These statistics are impressive, particularly when compared against overall household consumption which has grown by just 0.5% or economic activity across all sectors of the economy (as measured by GDP), which contracted by around 3.2%.
So in a nutshell, ever since Sunday trading laws were relaxed the retail sector flourished and grew by around 10 percentage points compared to overall economic performance.
Liberalising trading hours does not hurt the retail sector; if anything it encourages its growth.
Myth Number 2: There is no real demand for Sunday shopping
Linked to this is the question on whether there really is demand for stores to remain open on Sundays. I think the economic evidence suggests there is.
Unemployment and earnings are two key indicators that drive retail sales. If unemployment decreases or earnings increase you’d expect consumers to spend more as they are working and feeling wealthier*.
Looking at these two measures, unemployment has remained relatively steady but real per person earnings have shrunk by around 3.5%.
Despite this, retail sales have grown which suggests to me that some dormant demand has been released in the economy on the back of stores remaining open on Sundays.
In summary, there really is demand for Sunday shopping.
Myth Number 3: Employment in the retail sector is suffering
The third and final argument touted is that liberalising Sunday trading hours will lead to higher unemployment because of “intense competition”. I don’t want to go into the simplicity of this argument, but let’s take a look at what the numbers say.
Ever since trading hours were liberalised, the number of people employed in the retail trade sector has gone up by around 0.6% according to Eurostat.
Parliament’s decision making was not based on facts
In summary, publicly available data strongly suggests that the retail sector has flourished under more liberal trading hours. For me, Parliament’s vote on retail trading laws shows an underlying feature of the way policymaking is undertaken in Cyprus.
In any sensible country policies that are proposed by parties and/or authorities are subject to impact assessments and cost-benefit analyses all of which are usually released in the public domain. I happened to follow the events in the most recent UK general elections and was astounded by the amount of time politicians spent to justify and evidence the impact of their proposed economic policies to the electorate.
To my knowledge there was one occasion where our MPs revealed their intention to commission an in-depth study on the arguments for and against liberalising trading hours on Sundays. However this was just a delaying tactic, as a study was never carried out.
The effects of this can be reflected in some of the details of the bill which are just mind-boggling. Jewellery shops can remain open on Sundays but those selling food can’t. Old Nicosia was not deemed as part of the designated tourist zone but then mysteriously became a tourist hotspot overnight! This really is central planning at its worst.
Alastair Campbell’s latest book on winners and how they succeed has a good line on what makes successful policy, and by extension, politicians. In it he says that that “Policy should be guided by hard facts and not prejudiced or received wisdom”.
Once more our Parliament was guided by myths and rumours, not hard facts. And yet again it’s the consumers picking up the bill.
* Tourism could also have an impact on retail sales (the bigger the pool of consumers, the greater the demand), but I’ll not examine this given that we haven’t seen a dramatic uptick in tourist arrivals.
Barret Kupelian is a consultant economist who works in London. He writes in his personal capacity and his views do not reflect that of his employer. You can follow him on Twitter @BarretK or on his blog on factsright.wordpress.com