no third solution

Blogging about liberty, anarchy, economics and politics

Always Low-Prices. Always.

January 3rd, 2006

I’m going to jump the fence today and bash Wal-Mart for once. I’m decidedly pro-Wal-Mart on most issues, and I realise that this particular one is a little dated (maybe I’ll try to follow up on it) but I haven’t heard much about it since the initial reports…

Wal-Mart has been advocating a higher minimum wage, via WaPo. Unfortunately, this type of crap, gives the free-market a bad name. It is an abuse of power disguised as altruism – and when the truth comes crashing down, the economists of the world will be able to say “I told you so.” But our cries will be in vain, drowned out by the inevitable claims that this sort of action is proof that the free market is bad, and that capitalists don’t care about their employees, and how we’re all cold and heartless bastards – if we’d only drop our “theories” for a minute…

Let’s cut through the bullshit about this higher wage advocacy: From WaPo – Scott emphasized that he was calling for the improvement in wages for workers who are his customers and said the company could not change its own wage structure because of tough competition. “Even slight overall adjustments to wages eliminate our thin profit margin,” he said. “Because we are so big, people forget that we have to compete.”

Now, thin profit margins are the norm in retail/grocery – so although Wal-Mart could potentially weather almost doubling of the minimum wage (because most of its employees already earn about that much) the same cannot be said for wal-mart’s competitors. “According to Wal-Mart, full-time workers, who are about three-quarters of the workforce, are paid an average of $9.68.” Put it all together, and reading between the lines: The only way smaller stores can compete with Wal-Mart is by paying lower wages – so if Wal-Mart can successfully remove this possibility from their competitors, it can crush them, and do so within the bounds of the law.

Bernstein noted that Wal-Mart workers on average are paid slightly above minimum wage. But, he said, there are “certainly lots of workers” at the company that remain “in dead-end, minimum-wage jobs.

Let’s not lose sight of the fact that a significant portion of people earning minimum wage (or thereabouts) are minors, working part time, who have almost no marketable skills. The low wages paid to employees in low-skill jobs serve as a signal – if you want to earn more money than you do bagging groceries, the answer is not to legislate it so that a grocery bagger’s salary is on par with that of a cashier, it’s to get off your ass and move up the grocery food chain from bag-boy and become a fucking cashier.

The fat-cats in Washington also decided to chime in on behalf of Wal-Mart, and you know that what we really need is government collusion with big business. I find it odd that this sort of legislation will probably be heralded by the Left, always champions of the working poor, who are so quick to cry foul at the mere mention of Halliburton or Big Oil or [insert large corporation here]…

… Sen. Charles E. Schumer (D-N.Y.), a member of the Senate Finance Committee, released a statement saying, “If Wal-Mart can push for an increased minimum wage, so can the House and Senate leadership.” … Sen. Edward M. Kennedy (D-Mass.), said in a statement, “If the CEO of Wal-Mart 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.”

Wal-Mart Watch displays outright ignorance of economic fact via CNN:
Tracy Sefl, a spokeswoman for Wal-Mart Watch, a group that’s been highly critical of the retailer, said Scott’s comments on raising minimum wage were “laughable and out of left field.”…”We would be the first to applaud real change. But when a comment on raising minimum wage is dashed off and it flies in the face of Wal-Mart’s own corporate stance, that’s laughable,” she added.

But it’s not “flying in the face of the corporate stance,” on the contrary, if Wal-Mart can successfully, and legally prevent its competitors from buying labor at a cheaper rate, it can prevent them from competing.

For what it’s worth this is what Bastiat was referring to in “The Law,” that once legalized, an action is legitimized in the eyes of many. Preventing its competitors from acquiring labor on-the-cheap is no different than were wal-mart to lobby for mandatory vertical integration – that is, it would be a law that required Target, CostCo, Etc., to own and operate their own distribution channels. Inconceivable, you ask?

What Wal-Mart requests of this legislation is simply: “We are in compliance with legislation that we support (if not propose). And we understand that a great many of our competitors are not and cannot be in compliance with such legislation. Erego, we desire to impose said legislation upon our competitors for the PURPOSE OF DRIVING THEM OUT OF BUSINESS.

The coyoteblog echoes many of my sentiments. You see, when the consumers drive Mom & Pop out of business with their wallets, that’s the market working as it works, through free and voluntary choice, competition, and preference. When Wal-Mart lobbies to erect barriers to entry, and to impede the free choice of its competitors, and to restrict the market for labor in such a manner… I mean, seriously. This is competitive gerrymandering. This is cronyism. This is preferential treatment. This is all sorts of things.

And it is a far cry from any solution to alleviate poverty in this country. It is not, however, how markets work.

no third solution

Blogging about liberty, anarchy, economics and politics