Have you heard the argument that Wal-Mart should pay higher wages because other "Big Box Retailers," (such as Costco - which I have often heard cited) do so? So have I. I never had a really good answer for it, until now.
I like any article that digs into actual numbers, and so I leave you with only a small teaser. Let's say that Wal-Mart pays $10 an hour to start, while Costco pays $17 (and with better benefits!). Wal-Haters will tell you this proves that Wal-Mart is exploitative. But how many jobs are "sacrificed" to pay the higher wage? Having nearly 4x the annual sales Costco has, Wal-Mart also employs almost 12x as many people (at a wage 58.8% of Costco's).
If Wal-Mart were like Costco in its employment practices (not a perfectly sound analysis, rather, food for thought), 900,000 people would lose their jobs (From 1,300,000 to 440,000 - 4x Costco's employment) - a reduction of 2/3 of their workforce. The lucky 1/3 that stayed would make more, but at what price? Wages paid would decrease from $13M (1.3M employees @ $10/hr) annually to $7.48M (440,000 employees @ $17/hr) - meaning $5.5M doesn't end up in the hands of the working class. Is this good for the poor?
For more, read the whole article.
Wednesday, August 30, 2006
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7 comments:
who cares if it is good for the poor if all the people who would have worked @ the Wal-Costco are considered "working class poor" anyways? My point: More people have jobs but more people still make "poverty wages". Just a thought - I'm sure you'll destroy it :-)
But you do me the favor of having occasion to destroy it.
Consider:
900,000 Wal-Mart Jobs represents 7.5% of all employment in the retail industry, and an increase in unemployment by 900,000 would be an increase of 12.7%. It also represents 0.6% of all employment in the U.S.
As a whole, there are more people earning a living with Wal-Mart jobs as they are. And in a non-slave-based country, having that job is better than any alternatives they have at hand. Perhaps the job is a part-time thing they do to attend school. Maybe it's a retired person who just wants to earn some extra money. Maybe it's a mother working on the side to make things easier on her family.
People choose to work at Wal-Mart because, individually, doing so makes their life better off. To close that door to almost a million people I consider a bad thing. $10 an hour is only $20,800 a year gross, but it's much better than $0. I was only making $12.50 an hour at my last job, and on that I could afford an apartment, food, luxuries, and a decent life. And it gave me needed work experience to move into my present job.
That should be "providing occasion..."
And I just looked up the HHS peverty level in the contiguous US. For a family of 4, $20,000 a year. Evidently $10 an hour, 40 hours a week is just above the poverty level.
For a single person, it's $9,800 a year, or about $4.71 an hour @ 40 hours a week.
Dave - I think your economics are pretty persuasive.
But what about allegations that Wal-Mart conducts some pretty serious anti-employee activity, such as union busting, and forcing people to work overtime without paying them for it.
I geneally consider unions to be a bad thing, as it is nothing more than an attempt to use monopoly power in the "selling" of labor. There are instances where they are needed, especially when the employer has monopsony (single buyer, like a monopoly, but on the other side of the equation) power.
When people don't like their job, they are free to leave for something better, and for me this has tremendous pull. A Wal-Mart employee is no slave, owned by the company and able to be "forced" to do X, Y, or Z. Some people may be unwilling to work unpaid overtime - they shouldn't work at Wal-Mart, and overtime, probably won't. Some people may be willing to do so, and choose to stay. If they are willing, assuming the practice is not illegal, I say more power to them.
At my previous job, there were aspects I liked, and aspects I didn't. If everything were wonderful, they wouldn't have to give me money for me to show up. When the negatives outweigh the positive intangibles and the salary in my mind, I leave. In this regard, I'd think Wal-Mart is unexceptional.
Do you think that Wal-Mart brings any negatives in the long run? For instance, beating up the suppliers and putting some out of business that don't sell at a cheaper rate. And, from a suppliers point of view what if the competition to sell at the lowest price engages in illegal activity? If Wal-Mart puts everyone out of business what prevents them from slowly raising prices? In a perfect world you are right. People use Wal-mart as a 2nd income or student income. What about the single mother who can't find another job and is told to work unpaid overtime or quit? Just because capitalism works for the consumer, does it always work for everybody? What about the allegations that most Wal-Mart employees are on government sponsored health care (i.e. tax payers covering them) because Wal-Mart won't cover them? At some point as Wal-Mart is uber-successful do they have a duty to help their employees? Or, do they just keep hoarding the money? What about allegations that Wal-Mart gives 1% of it's earnings to charities? Bill Gates gives in upwards of 60%. All random thoughts, but my biggest point: Just because you CAN do something doesn't make it right.
"Do you think that Wal-Mart brings any negatives in the long run?"
-As opposed to a generic private company that exists to make a profit? Maybe, but not now, and probably never. I think they're by and large just a well-run business.
"For instance, beating up the suppliers and putting some out of business that don't sell at a cheaper rate."
-Assuming that said suppliers cannot sell to another company and continue business because Wal-Mart ran the other company out of business, right? Is it heartless to say that What about local producers that are encouraged and supported by Wal-Mart, like the painters I've seen at the Kietzke store? Wal-Mart is hardly the only game in town.
"And, from a suppliers point of view what if the competition to sell at the lowest price engages in illegal activity?"
-Then said competition should be prosecuted, Wal-Mart should be shamed/prosecuted if it was a party to the crime. But this scenario is not, in and of itself, caused by Wal-Mart, but by generic competition.
"If Wal-Mart puts everyone out of business what prevents them from slowly raising prices?"
You mean "What happens if Wal-Mart becomes a monopoly?" That would be a bad thing. But there is no sign of that at the moment, at least based on their profit. From what I've read Wal-Mart makes a comparable profit margin (~10%) to other companies in their industry - a sign of competition, not monopoly. Monopoly also assumes that nobody can compete. I find that scenario Incredibly unlikely. If Wal-Mart raises prices, someone that offers a better product/service/price combo to customers wins their business. Monopolies tend to arise in areas where there are significant barriers to entry, preventing new competition from arising (for a monopoly doesn't just have to cut the heads off every dragon, but of the new ones that keep popping up otherwise). I think that there are sufficient alternatives to prevent that.
"In a perfect world you are right. People use Wal-mart as a 2nd income or student income. What about the single mother who can't find another job and is told to work unpaid overtime or quit?"
-If that's the case, were it not for Wal-Mart she wouldn't have a job at all. That there is a dilema for her is undeniable, but I'd argue that at least having an employment option, even if unattractive, makes her better off than no options.
"Just because capitalism works for the consumer, does it always work for everybody?"
-Is it perfect? Heavens, no. But I attribute that to the fallen state of man - I don't think there is any system that has worked better.
"What about the allegations that most Wal-Mart employees are on government sponsored health care (i.e. tax payers covering them) because Wal-Mart won't cover them?"
-I believe, but am unsure, that this is a misnomer. Wal-Mart generally does offer some medical benefits to some employees, and in the recent uproar over this has expanded these programs. Wal-Mart looking bad is bad for business, therefore they have incentives to change. Hooray! But my main argument would be that it's the government's fault for offering the benefits in the way they do. Having a system in place and then getting upset if a company acts in a way that is affected by that system is unreasonable in my mind. To blame Wal-Mart is a red herring the government uses to distract people from their own broken system.
"At some point as Wal-Mart is uber-successful do they have a duty to help their employees?"
-Beyond the mutually beneficial contract of employment - "you do things for me, and I give you stuff like pay and some benefits in return"? No - they have a (real) fiduciary duty to earn a return on their shareholders' investments. Might it be wise for them to do so (to maximise employee loyalty, or earn favor in the public eye, increasing sales)? That's an internal cost-benefit problem for them to solve.
"Or, do they just keep hoarding the money?"
-By hoarding, I assume you mean the rich owners getting a return on their investment - and by internal re-investment in the form of expansion, creating more jobs, and therefore more profit. I say - it's their right.
"What about allegations that Wal-Mart gives 1% of it's earnings to charities? Bill Gates gives in upwards of 60%."
-As before, the leadership of Wal-Mart, as a public corporation, has a primary fiduciary responsibility to its shareholders to maximize the return on their investment. Bill Gates is a private citizen. He can do whatever the hell he wants with his money, and good for him for spending it in good ways. Should Wal-Mart spend someone else's money (the shareholders) in a way they may or may not desire that is not related to the business of the company? Is that like stealing from the investor?
"All random thoughts, but my biggest point: Just because you CAN do something doesn't make it right."
-But it doesn't make it wrong, either. I think most of these things are morally neutral. Wal-Mart's free to do what it likes. I as a customer am free to decide if I want to pay more to another store that acts differently. If the public *really* wants those things, then Wal-Mart changes or dies. Talk is cheap. Where does everyone's money go?
What's Wal-Mart's purpose? Charitable warm-fuzzies, or cold, hard profit? I remember someone saying that companies that don't focus on their real purpose crash and burn.
Group Question: Is profit moral?
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