My guess is most of us would agree that America seems to be in decline, but not for the reasons TIME magazine does. Much of the decline is centered in the politics and policies of the governing party.
But TIME is pretty sure that, given the study that they cite, the reason is … capitalism. Here’s the “it was great, but” reason:
“We looked at very broad measures, and at individual measures, too,” said co-author Hershey H. Friedman, a business professor at Brooklyn College – City University of New York. The most dangerous sign they saw: rising income and wealth inequality, which slow growth and can spark instability, the authors say.
“Capitalism has been amazingly successful,” write Friedman and co-author Sarah Hertz of Empire State College. But it has grown so unfettered, predatory, so exclusionary, it’s become, in effect, crony capitalism. Now places like Qatar and Romania, “countries you wouldn’t expect to be, are doing better than us,” said Friedman.
I wish those who opine about this sort of thing would begin to delink capitalism and “crony capitalism”. Because as soon “crony” is added, “capitalism” is no longer evident. Instead you have powerful corporate/social/political constituents helping write laws that raise bars to entry in a markets to impossible heights. You have the same entities suggesting regulations which have the same effect. Capitalism, in its barest essence, is a voluntary transaction between two free people which ends profitably for both. That’s it. When government begins intruding with regulations and laws designed to limit and protect certain constituencies, from corporations to unions, that’s not capitalism, whether you stick “crony” in front of it or not.
It is certainly cronyism. The government attacks, for instance, on Uber are rampant cronyism. They’re designed by government to protect an existing constituency that doesn’t like the competition (and has had a government granted monopoly for decades). Of course, in the end, it is the consumer – i.e. the citizen – who is hurt by this sort of cronyism.
And it appears that cronyism has gotten worse and worse over the past few years. So while America may be in decline, it isn’t because of capitalism.
It’s because of cronyism, government favoritism, or whatever catch word or phrase you wish to tag the phenomenon with. But leave capitalism out of it.
So the citizens of San Francisco voted themselves an increase in prices, er, excuse me, a “$15 minimum wage” and thumb their noses at the laws of economics.
Reality hits back. Borderland Books, an iconic SF bookstore, provides the perfect two-fold example with this announcement:
In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018. Although all of us at Borderlands support the concept of a living wage in principal and we believe that it’s possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage. Consequently we will be closing our doors no later than March 31st. The cafe will continue to operate until at least the end of this year.
Many businesses can make adjustments to allow for increased wages. The cafe side of Borderlands, for example, should have no difficulty at all. Viability is simply a matter of increasing prices. And, since all the other cafes in the city will be under the same pressure, all the prices will float upwards. But books are a special case because the price is set by the publisher and printed on the book. Furthermore, for years part of the challenge for brick-and-mortar bookstores is that companies like Amazon.com have made it difficult to get people to pay retail prices. So it is inconceivable to adjust our prices upwards to cover increased wages.
The change in minimum wage will mean our payroll will increase roughly 39%. That increase will in turn bring up our total operating expenses by 18%. To make up for that expense, we would need to increase our sales by a minimum of 20%. We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.
Note the key lines. “The change in minimum wage will mean our payroll will increase roughly 39%.” Yet, there’s not 39% room in the earnings to weather that increase, because an 18% increase in operating costs puts them in the red. Borderland Books explains why – retail price is almost impossible to get anymore so they can’t increase the price of the product to cover the cost. Result? The workers in the bookstore will have a wage of $0 as of March 31. I’m sure they’re thrilled.
Meanwhile the cafe will stay open because it can do what? Pass the cost on to the customer. So in essence, those who voted for the increase in minimum wage voted dollars out of the pockets of those who opposed it as well as their own. While the workers in the cafe will get their $15 an hour minimum wage, it will be achieved in an increase in the price of the goods the cafe sells (about 20%). And if their experience is anything like Seattle’s (which also instituted a $15 minimum wage) tips will dry up to next to nothing, while perks (such as free meals, parking, etc.) will be discontinued now that the workers make enough money to pay for most of them.
Yes, economic illiteracy has a price – and here it is. Fewer jobs, higher prices, all a result of fools who thought they could magic “a living wage” out of a vote without that having any consequences to the workers or themselves.
Well that’s determined by all sorts of variables – how much the person seeking the job is willing to take, how much the person wanting the job done is willing to pay, the scarcity or abundance of labor, etc.. And so in a free market, when a job is open it is up to the person seeking to have the work done and the person seeking a job to decide what it is worth to each of them. If they can reach agreement, then the job is offered to the person seeking the job. If agreement can’t be reached, then the job goes unfilled.
The bottom line is that no outside party can decide what that job is worth – in that mythical free market, that is. However, we don’t have a free market and legislators, trying to buy the good will of voters with other people’s money, often decide they know what every job is worth at a minimum. Thus the minimum wage.
Well this is anecdotal, I know, but it certainly seems to support every negative we here at QandO have been talking about for years. In the long run raising the minimum wage only raises the cost of labor. It does not change the worth of a job. Ever.
SeaTac workers are learning that the hard way:
Last January, SeaTac implemented a $15 per hour minimum wage for hospitality and transportation workers. The consequences to the drastic hike in wages are just beginning to be realized—and it’s not pretty.
“It sounds good, but it’s not good,” the woman said.
“Why?” I asked.
“I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.
“The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.
“What else? I asked.
“I have to pay for parking,” she said.
“I then asked the part-time waitress, who was part of the catering staff.
“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking.”
SeaTac is a small city—10 square miles in area and a population of 26,909—with an economy almost exclusively defined by the Seattle-Tacoma International Airport. Five months into the implementation of a $15 minimum wage and it appears that a deep sense of regret has already flooded the city and workers who should have “benefited” from the terrible economic policy.
Meanwhile, as the largest city in the Pacific Northwest and one of the fastest growing major cities in America, Seattle is on the verge of following in SeaTac’s woefully unfit footsteps. Seattle Mayor Ed Murray’s $15 minimum wage plan includes a phase-in period of three to seven years and makes no exception for business type or size. Murray’s plan elicited back-lash from prominent Seattle businesses owners and economists alike.
Like we’ve said, increased costs associated with the job will likely be passed along to either the customer or the worker or both. Here you have two perfect examples of how perks that helped workers and were of value to them (and for which they didn’t have to pay taxes) fell victim to some interfering government body unilaterally raising the cost of labor. The worth of the job done didn’t increase at all. Consequently, businesses looked at ways to compensate for the increase in labor cost. As for the decrease in tips? Well people tip well because they know most waiters and waitresses don’t make much for a wage. However, when they’re making $15 an hour, suddenly there isn’t a great or compelling reason to “help them out”. Tips decrease. Why tip someone for doing their job when they’re making that kind of money hourly. And, just as likely, prices have gone up to cover this expense. Consequently, overtime is limited, etc.
Its not that this is something hard to figure out. But the socialists among us never get past the feelgood part of it, because, well, because math is hard and economics is absurdly hard … or something..
Market? What market? We haven’t had a free market for much of anything in at least the last 75 years:
Business groups and congressional Republicans are blasting regulations President Obama will announce Thursday that could extend overtime pay to as many as 10 million workers who are now ineligible for it.
While liberals lauded the plan as putting more cash in the pockets of millions of workers, business groups warned it would damage the economy and Republicans said it was another example of executive overreach.
That’s right friends, now it appears that the Obama administration has decided … that’s right, “decided” … that in addition to the increase in the minimum wage, now it needs to redefine who is eligible for overtime. And, of course, that redefinition is going to negatively impact who? Businesses. And if they have to live with the changes, who then will it effect?
Oh, yeah, those that can least afford it. Why? Because it will increase the cost of doing business. And what do businesses do when their costs increase? Pass it on to the consumer.
Now, I ask, was that so hard to spell out? No. And is it hard to understand? Again, no.
So why is it liberals can’t follow the logic train to its final destination?
Well that’s fairly simple, they don’t think, they emote. The bureaucrats, who’ve never had to run a business or turn a profit in order to meet a payroll are experts in what others “need”. And they’re convinced those who are involved in running a business are just greedy.
“What we’re trying to take a look at is how we can make the labor force as fair as possible for all workers and that people get rewarded for a hard day’s work with a fair wage,” Betsey Stevenson, a member of the White House Council of Economic Advisers, told reporters Wednesday.
Right. Because, you know, the guy who risked everything and has succeeded to the point that he can hire others and thereby give the abysmal unemployment numbers some relief aren’t “fair” – by definition I guess.
“Changing the rules for overtime eligibility will, just like increasing the minimum wage, make employees more expensive and will force employers to look for ways to cover these increased costs,” said Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce.
Meanwhile in fantasyland:
Stevenson, however, contended that there would likely be an increase in employment as a result of the change, with companies deciding to hire more employees rather than paying existing workers at a higher rate.
Really? Or perhaps they’ll hire less and use technology to fill the bill. Technological answers don’t ask for raises, don’t require health care coverage, don’t need overtime, etc. In fact, it is likely to lead to less employment and more mechanization.
But we should understand the BIG reason:
Proponents say the regulations are an issue of fairness.
“I think that if you put in a full week’s work and you end up being asked by your employer to work longer hours, you deserve to be paid a little extra,” said Rep. Xavier Becerra (D-Calif.).
Is that right? Well, frankly, Rep. Becerra, that’s none of your freakin’ business. But, I assume you can point out the Constitutional basis for your “thought”, right?
Bunch of idiots. They are bound and determined to destroy the golden goose because they’re are woefully ignorant of the goose’s anatomy and how it works.
We spent quite a bit of time discussing this on the podcast yesterday. It’s from the Washington Post and is written by Steven Pearlstein.
I have some real issues with his characterizations of Capitalism, especially where he tries to use events and problems to imply that Capitalism is less than moral.
I had hoped to write up something, but as happens more frequently here lately, life has intruded. However, a commenter to the WP article summed it up nicely for me:
Free markets don’t regulate my excesses, guarantee equal opportunity or fairly divide the economic pie. Yet Mr. Pearlstein seems to be arguing that if free markets don’t do these moral things, then they’re immoral.
So there’s the central fallacy in the debate as posited by Pearlstein: Your system doesn’t do what I want it to do so it’s bad, even though your system can’t do what I want it to do because that’s not its purpose or design. To illustrate, your religion is bad because it doesn’t promote gay rights like I want even though gay rights is an utterly foreign and inimical idea to your religion, whose purpose and design is to save souls. (This was the essence of CNN’s coverage of the papal conclave.)
See the problem? OK, another try: Free markets don’t make me use less gasoline, guarantee me a nice job in return for getting a degree in Latino Studies, or prevent Donald Trump from getting too rich compared to me. Therefore, free market capitalism is bad, or at least not moral. OK, but free markets don’t and can’t do any of these things, so your standards and measures are irrelevant and thus illogical, see? Why not measure the moral character of free markets by what they do? For example, free markets provide places where people can meet to voluntarily transact business without worrying about getting clobbered or expropriated by government or criminals. What’s immoral about that?
You’ve gotta hand it to the left: They really know how to enshroud a debate in illogic, falsehood and emotion. Take off those pinko-colored glasses, though, and you realize that the debate Pearlstein wants to have is nonsense: Free markets can’t, don’t and won’t do what he wants government to do because free markets are not government. Ergo, the valid and relevant issue is whether we all want government to continue doing all that it’s doing at the price we’re paying for government to do it. And I guarantee you that no one on the left wants to have that debate.
The commenter, Lavaux, does a pretty decent job of nailing the fallacy which Pearlstein and many critics of Capitalism (and many other issues as he demonstrates) suffer under – claiming that it is something other than it is and then attacking that “something”, or, as we usually say, using a strawman argument. Pearlstein, as Lavaux points out, is slashing at those strawmen throughout his piece.
Capitalism has become the “go-to” boogy man on the left. All sorts of things that have no relevance or aren’t a part of Capitalism are blamed on Capitalism. Usually, however, if you dig deep enough (sometimes you don’t have to dig at all) you’ll find the hand of intrusive government somewhere in the problem mix. That immediately takes it from the realm of Capitalism to all sorts of other nether regions which have nothing to do with with it.
But, you know that …. unfortunately, a vast majority of your fellow citizens don’t.
Thus the demonization of Capitalism and the exoneration of government continue apace.
So tell me again why the government can’t seem to get along with what it already gets?
Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes—Edward Prescott has shown (especially in the Quarterly Review of the Federal Reserve Bank of Minneapolis, 2004) that the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60.
And yet the prevailing political attitude seems to be that of France’s “leadership”, i.e. government, has first claim on all your earnings and if you protest you’re “greedy”.
Speaking of France, California seems bound to duplicate its latest tax scheme:
Consider California, which just enacted higher rates of income and sales tax. The top California income-tax rate will be 13.3%, and the top sales-tax rate in some areas may rise as high as 10%. Combine these state taxes with a top combined federal rate of 44%, plus federal excise taxes, and the combined marginal tax rate for the highest California earners is likely to be around 60%—as high as in France, Germany and Italy.
Yet they wonder why people are fleeing the state.
Impact and implications?
Higher labor-income and consumption taxes also have consequences for entrepreneurship and risk-taking. A key factor driving U.S. economic growth has been the remarkable impact of entrepreneurs such as Bill Gates of Microsoft, Steve Jobs of Apple, Fred Smith of FedEx and others who took substantial risk to implement new ideas, directly and indirectly creating new economic sectors and millions of new jobs.
Entrepreneurship is much lower in Europe, suggesting that high tax rates and poorly designed regulation discourage new business creation. The Economist reports that between 1976 and 2007 only one continental European startup, Norway’s Renewable Energy Corporation, achieved a level of success comparable to that of Microsoft, Apple and other U.S. giants making the Financial Times Index of the world’s 500 largest companies.
Yet we continue to try to recreate Europe’s debacle here.
The economy now faces two serious risks: the risk of higher marginal tax rates that will depress the number of hours of work, and the risk of continuing policies such as Dodd-Frank, bailouts, and subsidies to specific industries and technologies that depress productivity growth by protecting inefficient producers and restricting the flow of resources to the most productive users.
If these two risks are realized, the U.S. will face a much more serious problem than a 2013 recession. It will face a permanent and growing decline in relative living standards.
These risks loom as the level of U.S. economic activity gradually moves closer to that of the 1930s, when for a decade during the Great Depression output per working-age person declined by nearly 25% relative to trend. The last two quarters of GDP growth—1.3% and 2.7%—have been below trend, which means the U.S. economy is continuing to sink relative to its historical trend.
But your political and financial lords and masters know best, don’t they? Just ask them. They continue down this road despite the fact the destination is in plain sight in Europe and it isn’t pretty.
Occam’s Razor states “entities should not be multiplied unnecessarily.” Said another way, the simplest explanation is usually the most likely explanation. In this case the simplest explanation is incompetence. But is it really incompetence? With the European example staring them right in the face it’s hard to believe anyone is that incompetent. The conclusion to their policies have already been proven to be a disaster.
So one has to being to consider other possibilities when those who are pushing the policies seem oblivious to the obvious.
You have to begin to wonder if it is a problem of hubris. I.e. “the only reason it hasn’t worked before is we weren’t in charge”. We’ve seen that in any number of instances throughout history where discredited or obviously illogical ideological ideas were tried and they again failed.
Or you have to consider the words “by design”. But then you’re stuck with trying to come up with a valid reason “why”. Recreating Europe’s debacle, or Japans’s or, for heaven sake, our’s in the ’30s would seem to be something smart politicians would attempt to avoid.
But here we are.
Economic growth requires new ideas and new businesses, which in turn require a large group of talented young workers who are willing to take on the considerable risk of starting a business. This requires undoing the impediments that stand in the way of creating new economic activity—and increasing the after-tax returns to succeeding.
And yet, we see a government bent on erecting even more impediments via increased taxation, costly new laws and onerous regulation.
Isn’t it about time we demanded to know “why?” More importantly, maybe we should ask whose side they’re on.
My friend George Scoville wrote a Black Friday-appropriate post on a problem with gift-giving, which touches on a broader point that libertarians should heed.
A microeconomics paper that’s bounced around econ-blogs for several years says gift-giving causes a huge deadweight loss: when someone else picks a gift for you, it may not be what you would have bought for yourself when you would have bought it, which normally implies that goods and services are being distributed inefficiently.
If that’s true, then Christmas is a tremendously wasteful institution, within an order of magnitude of the income tax, and we’d be better off giving each other cash gifts.
First, on a technical note, that paper was written in 1993, before Amazon wish lists and social media made it easier to detect people’s interests and needs, so perhaps we’re getting better at matching gifts with recipients.
More importantly, the paper fell short of meaningfully capturing deadweight loss, because it focused entirely on the value of the goods. Gift economies mostly operate on another kind of supply and demand: the desire for social cohesion, meaning closer relationships with family, friends, and other peers.
This is no trivial matter: relationships with people we can count on make us happier, healthier, and more successful. Anything that helps to build and cement those bonds is valuable, and while some academics and marketers try to quantify that value (it may be more than you’d think), the normal rule is that relationships of trust should not be fungible with cash. All societies have some social taboo against trading off the sacred and the mundane, which sometimes leads to absurdly stupid conclusions, but also allows people to build trust without worrying that anything intimate or of an extremely hard-to-price value (what’s the rest of your life worth?) will be easily sold for any of the mundane things that can be bought with cash.
It’s awkward when people give each other cash as gifts even if the amount is equal, and gift exchanges in which only one side puts any thought into it show unequal empathy. If you put a lot of thought into anticipating someone’s wants, and that person gives you a very generic gift, it’s like being put in the Friend Zone.
The point of gifts is to trip a hardwire in the brains of social mammals: cycles of giving and gratitude that go beyond simple reciprocity. When you’re trading cash, everyone is acutely aware of the value of what’s been exchanged, and there’s no fudge factor in the brain for “the thought that counts.”
That’s something we disagreeable, rationalistic libertarians should keep in mind, because the gift economy is a powerful force in human relations that resists and resents the intrusion of market forces, even if markets efficiently bring us the gifts.
So how did the great Wal-Mart protest go?
According to the Bentonville-based company, roughly 50 people who are actually on Walmart’s payroll joined today’s “walkout” nationwide. The protest organizers say “hundreds” participated. Even if 1,000 took part, that’s still less than 1/10 of 1% of Walmart’s 1.4 million associates.
If you can’t find 50 disgruntled employees in an organization of 1.4 million, well, you’re a refugee from the real world.
But look at that last number. 1.4 million people have jobs because of Wal-Mart. Then there’s the downstream effect – suppliers, etc. My guess is you’re looking at an organization responsible or at least partially responsible for 3 to 5 million jobs in this country.
And yet it is under attack.
Now, there were protests at Wal-Mart stores. But what should be clear is they weren’t protests by Wal-Mart’s vast majority of associates.
The “organization” which organized this flop, “OUR Wal-Mart”, is calling it a clear success. I mean what else would they call it? The fact that it only drew 50 employees in protest (50 who I assume are now ex-employees) seems to have been waived away for the fact that there were some protests.
Woo – hoo.
So who were the protesters? You’ll enjoy this:
Seems strange then that, according to organizer OUR Walmart’s website, the group speaks for actual Walmart employees. In the “About Us” sectionof its website, this not-for-profit describes its mission as follows: “We envision a future in which our company treats us, the Associates of Walmart, with respect and dignity. We envision a world where we succeed in our careers, our company succeeds in business, our customers…” (Italics mine.)
OUR Walmart was listed as a subsidiary of the United Food and Commercial Workers Union (UFCWU) in a 2011 Department of Labor filing. While the union disputes that the two organizations are one and the same, one thing is certain: The organizers of today’s protest represent not Walmart employees, but employees of grocery stores that compete with Walmart.
Oh, I’m shocked, shocked I tell you. Members from a union that represents the workers of stores that compete with Wal-Mart? Ah, of course – OUR Wal-Mart.
[W]hile the anti-Walmart movement claims to be about helping Walmart employees get better health care, improved working conditions, higher pay–not to mention preventing our children from the temptation of petty thievery—it’s really primarily about stopping the threat of cheap groceries–the same ones that go a long way towards helping cash-strapped Americans put food on the table.
Emphasis mine … and the reason, as mentioned yesterday, is this model works. It appears, at least superficially, that all but 50 Wal-Mart employees agree. Given the consumer reaction to the protests (uh, nil, nada, zip – didn’t slow down sales a bit), it’s rather hard to understand how any sane person could call the protests a success. But then no one said those who put together OUR Wal-Mart are sane, did they?
Not surprisingly, a union’s hand is found in a movement deceitfully claiming something that isn’t true and trying to cause problems for a company that employs a huge number of Americans and is responsible, at least partially, for the jobs of a huge number more.
And, watching these shenanigans, you can’t help but believe that unions are desperate – very desperate. Here’s a company which is offering the same products as their union stores offer at significant discounts and that’s an obvious threat to their continued employment. So they think nothing of starting a “movement” that is union backed and likely union financed to undermine that company by enticing workers, who apparently aren’t at all as disgruntled or as upset as this group has claimed, into a job action that’s guaranteed to be against their best interests and that would likely get them fired.
50 heeded the siren song and are likely now trying to figure out how to claim unemployment compensation.
And, they have the UFCWU and their apparent inability to think critically to thank for their folly.
Hey, maybe they can go apply at the union stores. I’m sure they’re hiring, huh? I’m equally sure they’re more than eager to hire someone who walked off their last job.
Jordan Weissmann has a piece in The Atlantic entitled “Who’s Really to Blame for the Wal-Mart Strikes? The American Consumer.”
While I will admit that the demands of the American consumer being partly responsible for the wage scale paid by Wal-Mart, I frankly see no consumer liability in that responsibility. Wal-Mart saw a need, constructed a model and has successfully fulfilled that demand. And last I checked, no one has twisted anyone’s arm or marched them into Wal-Mart and made them take a job.
The American consumer’s role? It is like us saying “you can have open borders or you can have a welfare state, but you can’t have both”. You can demand the lowest prices or you can demand “mom and pop” be saved and pay their workers more (but then you have to commit to voluntarily doing business and paying higher prices) but you can’t have both.
Weissmann is essentially claiming that the consumer is to blame for impending strikes by demanding lower prices. Lower prices mean lower pay and because Wal-Mart isn’t paying a “living wage”, it’s employees are striking. Again it’s a part of the left’s disingenuous”fairness” argument.
But by now, that low-price, low-wage model has become the industry standard among discount retailers, or at least close to it. The median retail worker earns $14.42 an hour, but at big box chains, the pay is significantly lower (the notable exception being Costco, which commendably pays its employees a living wage). Walmart, for instance, says it pays full time sales associates $11.75 an hour on average. But independent analysis peg the figure much lower, closer to $9. According to IBISWorld, that puts it a bit behind companies like Home Depot and Lowes, but ahead of its nearest competitor, Target, which has managed to put a more fashionable face on the same abysmal pay for its workers.
First a “living wage” is different for different people. If husband and wife are both working, the one working at Wal-Mart may be supplementing the higher wage of the other spouse. Who is to say what the Wal-Mart employee earns isn’t sufficient to live quite well on? If it is a teenager living at home, what’s a “living wage” to him or her? What, in fact, the Weissmann’s of the world are claiming is that any wage paid to anyone should be sufficient to “live on” based on whatever arbitrary standard they choose to apply. My reaction? None of your business – everyone goes to work and accepts the wages they do for their particular reasons. If they aren’t satisfied, then they can leave.
That brings us to point two, if you don’t like the pay at Wal-Mart, seek a job at another employer. I doubt that most “big box” companies look at their employees as permanent. Wal-Mart and others are, for many, a stop on the way (for experience) to higher paying jobs. If it’s not, if it is all someone is qualified to do, then that’s their problem, not Wal-Mart’s and not the shopping public’s. My suggestion is to seek out further training or schooling elsewhere. But it isn’t the job of the public to subsidize your wages just because you think you’re worth more than you really are.
Wal-Mart doesn’t exist to pay a “living wage”, whatever that is. It exists to serve it’s customers and turn a profit. It is that profit that allows them to provide what is demanded by their customers and to pay their employees. If wages are too low, workers will likely look to an alternative for employment. Yet, somehow, Wal-Mart remains fairly consistently fully staffed.
Like it or not (and the complainers usually don’t) that’s the model. It works. It provides consumers what they demand.
But that’s not what the fair police want, you see. And that’s where you see this sort of an argument:
There are many reasons why pay in retail is often paltry. Among them, it’s a low-skill industry with high turnover and a lot young workers. But the sector’s utter lack of of union presence certainly plays role. And for that, we can thank both Wal-Mart and Washington. From its earliest days, Wal-Mart has taken fiercely antagonistic stance towards organized labor, keeping its stores union free by using every ounce of leverage Congress has given employers — so much so that, in 2007, Human Rights Watch called the company “‘a case study in what is wrong with U.S. labor laws.”
In essence what Weissmann is arguing is workers should be paid more than their worth in a competitive labor market (low-skilled young workers with little experience). It’s a matter of “social justice” – that nebulous term used to justify intrusion into markets because they “care” (with your money, usually). And their go-to vehicle for achieving this “social justice” and upsetting a business model that favors the consumer is the union. Other than grow fat and demanding, that’s what unions are there to do.
See Hostess and GM for how that usually ends up.
But to his point, there’s a reason Wal-Mart is “fiercely antagonistic” toward unions. That’s because unions would wreck the model they’ve so painstakingly put together over the years, the one which their customers demand. Customers don’t show up there because they love Wal-Mart. They show up because they get more for their hard earned money.
Unionize, demand wage and pension increases and all the other concessions that put GM in the poor house and Hostess out of business and you’ll find one thing to be true – Wal-Mart’s customers will go to Target. Or Kohls or some other “big box” retailer.
But they’re not going to pay higher prices. They like the model. It works for them and their situation. And they will seek out the next best alternative when and if they see prices go up at Wal-Mart.
So, perhaps it is time for those like Weissmann to figure out what Wal-Mart is – it is a store that offers deep discounts on thousands of items that its customers demand. Oh, and by the way, it also has employees who are paid according to that customer driven model. The workers have choices, if they’ve prepared themselves – work at Wal-Mart to gain experience and move on, or go do something else. For those who haven’t prepared themselves for anything else, it isn’t the customer’s job to subsidize their wages just because they believe they should get more even if they haven’t earned it.
But for those who can’t let this go, I have an idea. Each and every Wal-Mart store ought to establish at least one check-out line which is for those who want to pay the highest retail price found for the items they’re going to purchase. Wal-Mart could research that, have the cash register price the items according to that research and at the end the Wal-Mart associate could say to the person, “and you over-paid by $53.00, have a nice day.”
Wal-Mart would then promise to take the difference between their prices and the premium prices and apply it to the pay of all Wal-Mart associates.
How’s that for fair? And people in that line wouldn’t have to feel like hypocrites when they diss Wal-Mart for it’s presumably low pay while they continue to buy at the store.
Of course, that particular line would likely to look like something out of a Halloween display, all covered in cob-webs and the like.
In a case study of cutting your nose off despite your face, union members who walked out on strike at bankrupt Hostess Brands (makers of Twinkies and other well known products) and refused to return to work by yesterday have forced the company into liquidation. Of the 18,000 workers who will lose their jobs, about one-third were union members.
The company had offered a compensation package that had cuts (to include an 8% pay cut). These were necessary during bankruptcy reorganization to keep the company afloat. The union refused the package and walked out.
Apparently, 100% of nothing is much better than 92% of something … especially in this job market.
Congratulations Bakery, Confectionery, and Tobacco workers and the Grain Millers International Union, among others. You put the capital “S” in Stupid, Selfish and Shortsighted (a crown previously held by the former union members of Eastern Airlines).
But I’m sure this will somehow end up being blamed on “greedy Capitalists” and be declared a “market failure” by the usual suspects.