Tuesday, May 13, 2008

Why It's OK For Wal-Mart To Pay Low Wages (And Other Thought Experiments)

One of the arguments anti-Wal-Marters use againast the retail giant is the number of Wal-Mart employees who receive welfare, foodstamps, subsidized health care, or any other of government assistance. The point being that Wal-Mart makes out like a bandit, pocketing money that workers need to live on while the government picks up the tab. It's a good argument in the sense that, yes, taxpayers do end up picking up the slack of low wage employers (not just Wal-Mart, obviously). But it's a poor argument when you keep in mind that there's no possible way an employer can ensure that every single employee is making enough money to meet their financial needs. (After all, a single mom with two autistic kids at home is going to have trouble providing for her family herself at any number of jobs that would otherwise ordinarily be considered middle class jobs. It's not just the Wal-Mart wages- 50,000 a year might not be enough.)

The question I want to ask is- assuming that more money for workers is a desired political outcome, why should Wal-Mart rather than the public as a whole be forced to pay that extra money and does it even make sense to have Wal-Mart do so. To answer the second question, I'd have to say no. Forcing a company to incur greater costs has one likely result and that is increased prices. In the case of Wal-Mart it's difficult to see how increased prices would benefit their own low wage workers or the low wage workers in other sectors of the economy. If prices rise along with wages, the wage increase is essentially meaningless.

More importantly, if we're talking about a large scale social issue, than why shouldn't the costs be spread around, rather than forcing Wal-Mart to pick up the tab. Even if your big concern is "social justice" and you think that somehow, magically, Wal-Mart will pay higher wages straight out of their profits, why does it make sense to attack the profits of Wal-Mart and not the profits of companies who have higher paid and higher skilled work forces?

The point is- as always- that large scale decisions have large scale consequences and that sometimes notions of fairness fail to take the entire picture into account. The question that's never asked is whether having low wage workers on public assistance is actually more efficient and more fair than artificially raising wages to create a living wage.

Next topic and this one's a bit shorter. This is more of a question for anyone who urges that George Bush or the next president should spend more money to rebuild the homes of those displaced from Katrina. Why do you feel Katrina victims should be treated differently than victims of different hurricanes, tornadoes, fires, and other natural disasters?

Or maybe you don't feel Katrina victims should be treated differently and you feel the government should help everyone in the country who's home suffers damage, regardless of the circumstances. The point is, before you start making grand pronouncements, have some understanding of what your talking about- have a real plan and have some understanding of what the costs of that plan actually are.

3 Comments:

Anonymous b.rose said...

Spot on. The most basic economics shows that total "utility", or aggregate public good declines if you make wal-mart up their wages. The price increases that get passed on to customers destroys value/wealth for customers, destroys jobs in walmart so now instead of 8 bucks an hour, you're making none and destroys wealth in the company (shareholders, anyone own a mutual fund?). These outweigh the benefits of higher wages easily.

You see Chris Dodd yesterday pronounced us to be in a recession; and he meant the technical definition, two straight Qs of declining GDP. He said he didn't believe the GDP # (.6%) growth from last quarter and that therefore he was right.

facts don't matter anymore

9:25 AM  
Anonymous b.rose said...

Barack Obama
"I don't think that we're ... necessarily going in the direction of the Depression," he said in response to a question during a visit to a suit-making factory.

"There are some similarities, though, to what happened back in the late 20s and early 30s and what's been happening now, and the biggest similarity is how we've been dealing with Wall Street and what's happening in the financial markets."

"As your president my job is to regulate what happens in the financial markets to make sure that people aren't taking these kinds of risks and that we're having full disclosure," he said.

"If we do that then I think we can feel pretty confident we're going to avoid a depression."

Did he just say depression? The stock market bottomed in January and we grew GDP in 1Q2008. Similarities to the depression? Hasn't Bush given them enough fodder to stick to policy differences and stay away from what can generously be considered hyperbole, but more accurately considered factually incorrect statements?

I hope you don't mind these off-topic posts dude, I only post stuff that I think you'd find equally entertaining.

2:08 PM  
Blogger lonely libertarian said...

Nope I love it- I just wonder where in the Constitution Barack Obama finds that it's his job as president to regulate financial markets.

12:17 PM  

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