Last fall, after they’d earned some money doing chores, my two oldest daughters asked me to take them to get their nails done. As we passed a couple salons on the way to the one they picked out, I wondered, is this essentially a commoditized service? My microeconomics class had recently covered the four common industry structures, so the topic was fresh in my mind.
Perfectly Competitive Nail Salons
Most people know that a monopoly exists when there is only one producer and/or seller of a product. Think running water or electricity. A handful of competitors define an oligopolistic industry, like automobiles, cell phone service providers, and spreadsheet programs. Many students think they know what a perfectly competitive industry is until I introduce them to monopolistic competition.
My day job exists in the former. The light, sweet crude that drillers find in Texas is the same stuff they find in North Dakota, which is the same that’s found in Pennsylvania. Given the homogeneity of the refined end-products, it has made the overall oil market, including the heavier crude found in OPEC countries, more competitive. We all end up as price takers.
It seems to me that nail salons come as close to a perfectly competitive service as any other.
When I ask students to name some perfectly competitive goods, I usually hear “restaurants,” “electronics,” “clothes,” etc. While producers and sellers of these goods certainly compete with one another on price, there are differences in other areas. A burger from Wendy’s is obviously different from Taco Bell fare, nor is it identical to a burger made at Chesters (my local favorite). As a result, they can be marketed differently in the hopes of finding a niche.
After discovering that ten salons exist along that five-mile stretch of road my daughters and I traveled that day and conducting an informal poll of female family members, friends, and coworkers, it seems to me that nail salons come as close to a perfectly competitive service as any other.
Growing Industry, Low Wages
This came to mind recently when a brief report on Axios regarding the proliferation of nail salons (and spas) popped into my LinkedIn feed. In citing a study by the UCLA Labor Center, Erica Pandey underscored the unstable, “lowest-paying” nature of jobs in the industry.
That’s not likely to change.
First off, growth in the industry will by definition exert downward pressure on prices due to increased competition. That, in turn, will necessarily keep a natural lid on wages. Also keeping prices in check is the latent competition of the do-it-yourself-ers at home.
A desire to make licensing more “accessible” is incompatible with the suggestion that we “ask ourselves ‘are we paying too little for the service?’”
One focus of the study is “barriers to licensing.” This comes at a time when resistance to the practice, in general, appears to be gaining traction. The hundreds of hours, years of schooling, and cost required to earn a license restricts the number of manicurists, which artificially keeps a floor under wages, preventing them from dropping further.
A desire to make licensing more “accessible,” while desirable, is incompatible with contributing author Saba Waheed’s suggestion that we “ask ourselves ‘are we paying too little for the service?’”
Booming Economy and Thriving Society
Nevertheless, an expanding hospitality industry is a sign of a thriving society. As lead author Preeti Sharma points out, “Getting your nails done used to be a luxury for the wealthy,” much like owning multiple computing devices. Now, these leisurely indulgences are an “affordable service available to low- and middle-income clients.”
When masseuses or aromatherapists, for example, are willing to offer their services to greater numbers of customers now able to pamper themselves a little, exactly who is losing in this transaction?
Imagine coming to America only to be confronted with confusing American legalese when English isn't even your first language.
The study makes some other notable observations, such as the clash between language barriers and government oversight.
It’s enough of a challenge for native English speakers to navigate numerous multi-jurisdictional regulations. Imagine for a moment, though, coming to America to make a better life for yourself, only to be confronted with countless rules when American legalese is not your first language, much less English. Many shop owners are forced to go out of business if/when a claim is filed against them by the “independent contractors” who work at their salons, the other point Ms. Pandey highlights.
Entrepreneurship in the Salon Industry
She notes that “30% of nail technicians are self-employed … working without benefits or labor protection,” an arrangement some folks prefer nonetheless.
Though a slightly different profession, my wife’s hairstylist best friend enjoys the opportunity to “expand her clientele” by keeping apprised of the latest trends, “new tools,” etc. Drivers for Uber and Lyft might be an even better example. A little extra “side hustle” earned some the chance to get in on the IPOs for the respective companies.
Interestingly, the UCLA report concedes that “nail salon workers mistrust (state) investigators.” But you wouldn’t know this from the Axios brief.
The freedom to be self-employed, regardless of starting wages, can overwhelm the benefits of a typical employment arrangement.
When we discuss the trade deficit in my classes, I emphasize that it’s an incomplete picture. “You must also consider foreign direct investment, which would necessarily be in surplus.” The same goes with the headline unemployment rate and the labor force participation rate: a strong reading for the former is hollow when the latter is weak.
Axios’ mission is “getting smart content … narrated with true expertise” in front of readers with a “shorter attention span” in a “substantive and meaningful way.” Doing this while “killing banner ads and pop-ups” will certainly attract fans, but if a news summary is too short, it runs the risk of being one-sided.
The freedom to make one’s own way and possibly reap great rewards, regardless of starting wages, can prove enticing enough to overwhelm any appeal of benefits found in typical employee-employer arrangements. The tradeoff for some isn’t worth the “protection” provided by the government.