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Wal-Mart Warms to the State (advocates minimum wage increase)
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| Capitalizt |
http://www.lewrockwell.com/rockwell/wal-mart-state.html
Wal-Mart Warms to the State
by Llewellyn H. Rockwell, Jr.
[Posted on Friday, October 28, 2005]
H. Lee Scott, Jr., the CEO of Wal-Mart, surprised many by calling for an increase in the minimum wage. And what accolades were heaped on him! The company was even cast in a new role, from the exploiter of workers to the responsible advocate of pro-worker policies.
And how selfless, for who has to pay such higher wages but companies like Wal-Mart? And thus do we see a corporation set aside its business interests on behalf of the long-term interests of society.
The whole thing befuddled Wal-Mart haters as much as it disgusted its free-market defenders.
Ted Kennedy wouldn't go so far as to praise the company, but he did say that "If the CEO of Walmart can call for an increase in the minimum wage, the Republicans should follow suit on behalf of the millions of working men and women living in poverty."
Other lefties just wouldn't believe it. The spokesman for Wal-Mart Watch said that Scott's call for a higher wage floor was "disingenuous and laughable."
And yet, let us think this through. Might there be another reason Wal-Mart would advocate a higher minimum wage?
Before looking at the evidence, let's do some a priori theorizing based on the history of US corporate regulation. Historians such as Robert Higgs, Butler Shaffer, Dominick Armentano, and Gabriel Kolko have chronicled how the rise of business regulation, including intervention in market wages, was pushed by large companies for one main reason: to impose higher costs on smaller competitors.
This is how child labor legislation, mandated pensions, labor union impositions, health and safety regulations, and the entire panoply of business regimentation came about. It was pushed by big businesses that had already absorbed the costs of these practices into their profit margins so as to burden smaller businesses that did not have these practices. Regulation is thus a violent method of competition.
Think of it this way. Let's say you run a retail coffee shop that sells only "fair trade" coffee, which is expensive to acquire, but for which consumers are willing to pay a high price. All is going swimmingly until a competitor shows up and sells unfair coffee that tastes just as good for half the price.
Let's say consumers begin to change their minds about the merit of your "fair trade" coffee and your profits fall. You must make a change to survive. You can compete by offering a wider range of choice. Or you can lobby the local government in the name of "social responsibility" (oh, such high ideals!) to require that all coffee sold in your town be "fair trade."
Who does that benefit? Your company. Who does it hurt? Their company.
Moving from theory to reality, we find that this is precisely what Wal-Mart is up to. The hint comes from the news stories: "Wal-Mart maintains that it pays above the current $5.15 an hour minimum wage to its employees."
Now, most readers might just look at this as a case of leading by example. Would that everyone were as fair as the wonderful Wal-Mart! But a second look suggests another interpretation, namely that it wants to slam its smaller competition, which will be seriously harmed by having to pay more for labor.
The current minimum is $5.15. According to studies, Wal-Mart pays between $8.23 and $9.68 as its national average. That means that the minimum wage could be raised 50% and still not impose higher costs on the company.
Wal-Mart itself makes even more elaborate claims on Walmartfacts.com: "The national average for regular hourly Walmart wages is nearly twice the federal minimum wage, and higher in urban areas." If true, the national minimum could be raised by 100% and leave the company unaffected.
So who would it affect if not Wal-Mart? All of its main competition. And the truth is that there are millions of businesses that compete with it every day. Many local stores have attempted to copy Wal-Mart's price-competitive model, but face lower costs and can actually thrive.
There are many ways to compete with Wal-Mart. Not all shoppers like sprawling stores. Others like better service with more experts on the floor. Others just hate crowds. But a main way to compete is to hire lower-priced labor. This could mean that your employees are from a "lower" rung on the social ladder, but they too need opportunities. The savings can be reflected in other amenities that Wal-Mart does not offer. There can be non-standardized products otherwise not available. The location might be better. Even prices for goods can be lower.
Even similar stores such as K-Mart can pay lower wages and that can make the margin of difference. K-Mart pays over a much wider range, as low as $6.75 an hour. A major competitor is mainstream grocery stores, where workers do indeed start at minimum wage. Target too pays starting employees less than Wal-Mart, if the Target Union can be believed.
Now, if Wal-Mart can successfully lobby the government to abolish lower-wage firms, it has taken a huge step toward running out its competition. The effect of requiring other firms to pay wages just as high as theirs is the same as if the company lobbied to force other companies to purchase only in high quantities, to open large stores only, or to stay open 24 hours. By making others do what Wal-Mart does, the company manages to put the squeeze on anyone who would dare vie for its customer base.
Now here is the great irony. The left has long been in a total frenzy about how Wal-Mart saunters into small towns and outcompetes long-established local retailers. Wal-Mart's opponents have whipped themselves into a frenzy about the company's success, claiming that it always comes at a huge social cost.
Now, most of this rhetoric is overblown and ignorant. Wal-Mart would not have made any profits or grown as it has without having convinced the consuming public to purchase from the store. Consumers could put the company out of business tomorrow, just by failing to show up to buy.
The left's claims of unfair practices would be valid if Wal-Mart did indeed work to impose legal disabilities on its competitors – in effect making it illegal to outcompete the company. And yet that is precisely what raising the minimum wage would do: impose a legal disability on those companies engaged in lower-wage competition with Wal-Mart. So the economically ignorant left advocates raising the minimum wage.
Thus has our CEO friend Mr. Scott discovered a viciously devious tactic. He sees a way to drive out the competition by doing precisely what Wal-Mart's biggest critics are advocating! And what will be the result? Wal-Mart's share of the market will go up, and its degree of cartelization over the mass consumer market will increase, not by market means but through government intervention. Then we can expect the left to once again fly into another hysteria about the size and growth of the company – totally oblivious to how they worked to bring it about.
Free-market advocates who have long defended Wal-Mart can only be disgusted at this shift in the company's methods from competing on market grounds to calling for the state to crush its competition. Even more disgusting is how the company can count on the economic ignorance of its critics to help do it.
The minimum wage should not be raised but abolished. If free competition and a non-monopolized market are what you favor, you too should favor abolishing the minimum wage. In a purely free market, Wal-Mart would discover that there are indeed limits to growth, and that others are willing and able to learn from its successes. |
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| Sunsnail |
| Very interesting read, but I'm not sure how abolishing the minimum wage would be beneficial to workers |
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| Shakka |
| The point is that there is an eeeeevisl, dark sith lord puppet-master thinking about a more grandios strategy. the proles--this is much bigger!!!:thepirate |
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| Capitalizt |
| quote: | Originally posted by Sunsnail
Very interesting read, but I'm not sure how abolishing the minimum wage would be beneficial to workers |
Well having more JOBS available tends to be a good thing. If Wal-Mart can successfully use government power to eliminate weaker companies from the industry, they will leave younger and unskilled workers with fewer and fewer choices. |
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| Sunsnail |
| quote: | Originally posted by Capitalizt
Well having more JOBS available tends to be a good thing. If Wal-Mart can successfully use government power to eliminate weaker companies from the industry, they will leave younger and unskilled workers with fewer and fewer choices. |
but then everyone would be poor? ... :wtf: |
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| George Smiley |
Well that article certainly missed the point!!
Such care for the smaller companies! But completely overlooks the reason we want a higher minimum wage - for the workers! Why does one bloke who owns a company (a rich ****** no doubt) come obove say 100 people who work there?
Unemployment? Take home less profits I say... |
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| Shakka |
| quote: | Originally posted by George Smiley
Why does one bloke who owns a company (a rich ****** no doubt) come obove say 100 people who work there? |
Wealth envy anyone?
Perhaps because he creates those 100 jobs of which you speak. |
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| George Smiley |
| quote: | Originally posted by Shakka
Wealth envy anyone?
Perhaps because he creates those 100 jobs of which you speak. |
And? It works both ways dunnit? |
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| Capitalizt |
| quote: | Originally posted by George Smiley
And? It works both ways dunnit? |
You are proving the author's point...arguing from pure emotion. ("But I care about the workers!!")...ignoring the reality of what a $8 minimum wage would do...eliminate the weaker competition (along with those jobs) and make Wal-Mart more powerful ever.
No, if you really cared about workers you would favor the abolition of 99% of all taxes and regulations that small businesses face every day. You would favor eliminating government control and suppression of industry...You should want to ELIMINATE the barriers to success and stop punishing companies that do succeed in the marketplace. Do this, and you will give low skilled workers many more alternatives than going to a mega corporation like Wal-Mart that can absorb the cost of government foolishness. |
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| St_Andrew |
| quote: | Originally posted by Capitalizt
You are proving the author's point...arguing from pure emotion. ("But I care about the workers!!")...ignoring the reality of what a $8 minimum wage would do...eliminate the weaker competition (along with those jobs) and make Wal-Mart more powerful ever.
No, if you really cared about workers you would favor the abolition of 99% of all taxes and regulations that small businesses face every day. You would favor eliminating government control and suppression of industry...You should want to ELIMINATE the barriers to success and stop punishing companies that do succeed in the marketplace. Do this, and you will give low skilled workers many more alternatives than going to a mega corporation like Wal-Mart that can absorb the cost of government foolishness. |
Doesn't it work like that in America that if you have fewer than x workers in your company you don't have to pay them minimum wage if you don't want to?
That would pretty much kill your argument then. |
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| George Smiley |
| quote: | Originally posted by Capitalizt
You are proving the author's point...arguing from pure emotion. ("But I care about the workers!!")...ignoring the reality of what a $8 minimum wage would do...eliminate the weaker competition (along with those jobs) and make Wal-Mart more powerful ever.
No, if you really cared about workers you would favor the abolition of 99% of all taxes and regulations that small businesses face every day. You would favor eliminating government control and suppression of industry...You should want to ELIMINATE the barriers to success and stop punishing companies that do succeed in the marketplace. Do this, and you will give low skilled workers many more alternatives than going to a mega corporation like Wal-Mart that can absorb the cost of government foolishness. |
Maybe I am arguing from emotion but that doesn't mean its not valid. America has summat like 15% below the poverty line - you saw what the effects of that was in New Orleans a short while back. As the gap between rich and poor widens poverty will become worse and people will become more desperate. You wanna eliminate 99% of taxes and regulations? All that means is the corporations are given carte blanche to do whatever they want - and what they want is to pay low wages and charge high for their products - leaving a hell of a lot of people not being able to afford basic commoditees. Your country already has summat like the higherst crime rate in the world (did you see the Thais raping each other and looting after the Tsunami?) and there is a reason for that culture...an it will get a hell of a lot worse if people like you get your way... |
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| Fir3start3r |
| quote: | Originally posted by Shakka
Wealth envy anyone?
Perhaps because he creates those 100 jobs of which you speak. |
Minimun wage increase > No wage at all
Interesting article, I'm sure the left side of the blogsphere is in a conundrum since the right side basically just obliged their wage demands...
Interesting stratstagies (<-- sp intended) indeed...:disbelief |
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