Friday, November 29, 2013

Black day for Wal-Mart

It was bad enough when it was just Black Friday. Then the stores started racing each other to see who could open earliest. One year when I took my oldest up to College Station to watch the Longhorns stomp on the Aggies we saw the line of folks waiting outside a store before the football game ever started.

Now, of course, we have stores open on Thanksgiving Day because it's so much more important to sell the latest consumer devices than to allow your employees to spend a day with their families.

Today is also a day of protest against Wal-Mart and their business practices. Wal-Mart made around $17 billion last year. The company earns that profit by paying its hourly workers subsistence wages and by holding their hours down.

Sign at a Wal-Mart in Ohio asking for donations for associates who can't afford Thanksgiving Dinner on the wages Wal-Mart pays.
Wal-Mart is able to do this because their actions are subsidized by our government us. To be fair, Wal-Mart isn't the only company that pays its employees poverty-level wages because we, the taxpayers, subsidize them. Wal-Mart, however, serves as the poster child because of the ruthless way it conducts its business.

Workers who toil for minimum wage can work full-time and still find themselves under the federal poverty line. They may receive food stamps (SNAP), welfare payments or earned income tax credits to supplement their meager incomes. They may also qualify for Medicaid (or subsidies for private health insurance). President Clinton's welfare reform package encouraged companies to keep their wages low since welfare recipients were required to work (and, needless to say, found themselves in minimum wage jobs).

These income transfer programs allow them to scrape by. But someone who is working a full-time job shouldn't have to just scrape by. It is a sad statement on our economic model that you can work full-time and still be living in poverty.

Ironically enough, the same companies that take advantage of income transfer programs to subsidize their low wages, do their best to do away with any legislation that would further regulate their businesses. They are more than happy for government interference when it allows them to pay poverty-level wages but want no part of it should the proposed rules or regulations deflect one penny from the bottom line.

The federal minimum wage must be raised. And I'm not talking about President Obama's day-late-and-dollar-short plan of hiking it to $9.00 an hour. That figure still leaves full-time workers in poverty. The minimum wage needs to be raised to somewhere between $12.00 and $15.00 an hour. Wal-Mart and its shareholders can subsist on a little less profit every year but their employees can't survive on what they make today. That dynamic needs to change.

Our economic philosophy cannot be built solely on the idea of greater economic efficiency. Our society is not a machine. It is made up of people who all have to put food on the table and clothes on their backs. Economic fairness and equity must trump efficiency in the long run.


Mark said...

Suppose I am a small business owner. Now suppose that I have a razor thin profit margin. Suppose that the federal government mandates that I increase increase my employees pay by 25%. If I am forced to do this I merely let enough employees go to meet my necessary profit margin or I go under. Your absurd scenario will lead to greater unemployment and more folks dependent on the government for ALL their needs.

Spring, Texas

Lee said...


Economics Jim said...

While wonderfully naive, your desire to give away other people's money hits a wall when you look at the specifics. If every penny of WalMart's profit went to employees, it would fall far short of your compensation scheme. They hire upwards of 1.5 million people, not including those they employ in contractor mode, that $17 billion dries up pretty quickly just to give employees a whole $5/hr each.

The idea of working at WalMart for regular folk is that they don't intend on remaining minimum wage employees as opportunities are open for them to move up based, gasp, on merit and ability. Most of the store managers make a healthy salary and started in those horrible minimum wage jobs you abhore so much. Remove the incentive and you remove the company...

Thomas Houston said...

Some want their cake and eat it too. Walmart haters point out the amount of items made in China (in my day, we used to complain about all the "junk" made in Japan, even after their quality control surpassed ours by a huge amount), the low pay/benefits, and how predatory it gets when it moves into an area. Supporters, basically all those shoppers that vote with their dollars, point out that they get more bang for their buck shopping there.

If the corporate bosses were not making so much money in comparison to the worker drones, even when their decisions were questionable for long term profits, most wouldn't care. As it stands, I lean toward Jim's side since the company offers you a chance to further yourself, you just have to run with it, knowing full well that most employees will do better elsewhere.