Jasper Smith

Commentary on politics, economics, culture and sports.

A little Sunday Wal-Mart bashing

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Kevin Drum thinks Wal-Mart can do better by its employees:

Labor expenses only amount to about 10% of revenues for Wal-Mart. If you increased the pay of every single clerk, greeter, and stocker in the chain by two or three bucks an hour, it would only increase Wal-Mart’s prices by about 2%. Their prices would still be the lowest around because it’s not labor costs that account for most of their efficiency. It’s world class logistics, aggressive offshoring, enormous sales volumes, and ruthless bargaining with suppliers that account for most of it. If Wal-Mart had to offer low wages and lousy benefits just to stay in business, that would be one thing. But they don’t. We should expect them to do better.

Personally I think this is the wrong approach. Wal-Mart no doubt could afford to pay higher wages, but, like nearly all companies, they don’t pay more than they have to to attract and retain the workers they need. Pfizer or Goldman Sachs don’t pay the wages they do because they’re nice firms, they pay the wages they do because they have no choice: workers who possess such skills as analytical chemistry and currency arbitrage are more expensive than shelf stockers. And, although offering a “buck or two more” might not break the bank for Wal-Mart, offering significantly more robust benefits probably would have more of an adverse effect on their profits than Kevin’s glib assessment indicates. Health insurance is very costly in America. Unlike other, wiser nations, we rely on employers to act as purchasing agents for health benefits. It’s a stupid practice. Wal-Mart and McDonald’s shouldn’t be disparaged for a rational response to a policy that is not their fault.

I think Liberals waste a lot of energy engaging in corporation bashing. A company’s job is to make money. Not to provide for a just society. That’s government’s role. By all means spend more money on a stronger social safety net and universal healthcare, and raise taxes if you have to. But let companies get on with what they know how to do best: generate profits for their owners.

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Written by Jasper

September 30, 2007 at 3:24 pm

Posted in Economics, Policy

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