Russ Roberts dismantles recent anti-WM criticism here.
An idea, for anyone interested: critics accuse WM of paying sub-standard wages, but from what I understand, they also offer deep employee discounts. Has anyone calculated the value of Wal-Mart’s total compensation accounting for these discounts? Reducing one’s grocery bill by 25% could be a powerful incentive to Wal-Mart employment, and one that might not show up in the wage data.
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I think it beautifully ironic that advocates of unionization defend their cause by proudly declaring that they fight for “living wages,” yet if you were to ask them how people managed to live before the implementation of the minimum wage, they’d say that workers scraped barely enough to get by i.e. wages just enough to continue living i.e.e. “living wages”; if they really cared about the working man, they’d fight for “a living wage and something extra,” or as I call it, a “+1 wage of living” (though ironically were they to do this, they’d effectively be saying that money can buy happiness, a dictum the left has fought against for ages).
My Sister worked at Wal-Mart one summer; the employee discount was 10% on merchandise but if I remember there was no discount on food items, or perhaps a very small discount. Remember Wal-Mart has a net profit marging of 3-4%, if they discount groceries they lose money.
The Wal-Mart success stories are those who want to become managers and corporate employees, there are lots of opportunities to climb the value chain of salary to the higher order positions. Also in small towns WalMart pays less but pays competitive wages in higher cost of living areas.
People that demand higher pay, must also demand higher prices if these employees are to keep their jobs with a 3% profit margin.
Around here (Everett, WA, USofA) some people (in he newspapers and on TV) complain that Walmart kills the local businesses but there has been nothing but praise for a new humongus discount mall. Anyone explain that to me?
Could it be that Walmart doesn’t NEED to advertise on TV or in the local papers?
I personally know people who have taken jobs at Walmart, if only temporarily, solely for the discount.
If the pay were as bad as they say it is, they would not be able to get people to take the jobs. (Obviously.) Instead of complaining or demanding more pay, why don’t the WM employees just work some place else that pays better?
Or, is is unfair for me to make such a suggestion?
Dewaine, you are so naive!
Don’t you realize that Walmart has destroyed every other job by unfairly satifying customers, & that if we don’t stop them (that is to say if the government doesn’t stop them) everyone will be poor, too poor even to shop at Walmart?
Wait a minute… then Walmart will have no customers. Maybe that’s the way to bring Walmart down!
One legitimate claim against WalMart that I’ve discovered is their use of emminent domain.
True, David, which is why care must be used in defending the free market as opposed to defending Wal-Mart as an example of the free market (which it can’t be in our mixed system). We can defend specific policies of Wal-Mart, though.
I worked at WalMart for a good 20 months and it was a 10% discount. Pretty normal actually. And you didn’t get discounts on food. Indeed, I did most of my food shopping at the neighboring Econo Foods (until it closed, sob but now their’s a really neat-o sporting goods store) or HiVi when I worked there (see http://www.lewrockwell.com/orig4/saboe1.html and the updates here http://www.geocities.com/tracysaboe/ )
The Christmas bonus was really good those. I was able to take an extra 10% discount on one item. (20% not 10% off the current 90% Price Point which would equal 19% off.) So both Christmas’s that I worked there I saved my money for a big ticket item and saved a lot of money on it.
It was a good place to work. It was sad that I had to go.
Tracy
Dewaine, I understand in many small towns throughout the country it’s very hard to find employment outside of WalMart. A Supercenter tends to wipe out alternatives for entry-level labor in these areas. WalMart’s gotten large enough to almost be a government entity unto itself, thus challenging many notions about the “free market”.
Wal-mart is a terrible company to work for but if you live in an area where the only other unskilled job other than mcdonald’s is 50 minutes away, what choice do you have other than to up and move which if your that poor you probably can’t afford to move. That is why wal-marts thrive, and 3%-4% profit what kind of crack are you on… there “known” mark-up is between 35% to 94% on any given item. Most wal-marts are running at almost half staff these days too if you bothered to look into it. That equals out to a rich successful company that will grown until it collapses like most over blown companies do. Yup.
Wal-Mart’s use of eminent domain? Wal-Mart has no power of eminent domain. THAT is a power to be used and abused by your local government. Wal-Mart can only ask. If that power is used, don’t blame Wal-Mart, blame the entity that holds that power. Blame Wal-Mart for asking, but they can’t seize your property.
My husband is going in for the third and final interview today. With all of the bull you hear about how Walmart underpays its employees, I was shocked to hear how much he will probably be starting out at. Plus they offer insurance, which may not be great, I don’t know, but it’s definitely better than none, and it’s inexpensive. Plus, they offer dental. Plus they offer 401k. Plus, they will match dollar for dollor what you put into a health savings account. If it weren’t for Walmart, I wouldn’t be able to afford grocery’s. Albertsons is WAY to expensive. Also, my husband won’t work on the Sabbath, and Walmart is okay with that, even if he becomes a manager. They provide tons of jobs in an area with very few. So, in conclusion, I like Walmart.:)
Wal Mart offers 10%, not on food items. Most employee’s do seek better paying jobs, as well as a better work environment since usually wal mart doesen’t care( as with most corporations) about their workers. There is a huge turnover rate of employee’s at all wal mart across Canada, I am not sure about the United States. I was told I would not be made to work on Sunday’s. my day of worship but I was kindly told a few weeks in that it was madatory. There should be no judgement on whether Wal Mart is good or bad, it’s all about neccesity and personal choice. I chose not to be treated unfairly and currently work for 13/hour at Atlantic superstore. It’s a personal decision, and i wouldn’t go around sayinf ” I hate Wal Mart” though I choose not to shop there. It’s a great job for some people who really need work or who actually enjoy it there.
I have worked at Walmart for over 2 years. I do have a college background, but in our area of Ohio, jobs are so scarce. Most people I work with are there because of necessity to supplement their first or second income. Walmart does now give an extra 10% off on fresh fruit and vegetables as part of their program to promote a healthy lifestyle. They do offer insurance to its part time employees after 1000 hours of service. Full time employees have additional health benefits. While the insurance may seem high to some people, many employers in our area are either raising deductibles, or cutting out insurance all together. We do get the discounts at Christmas, and the 10% off discount card on regular purchases. We are not permitted discounts on already reduced prices. My starting wage was based on my experience in working in the retail industry. Some people start at a higher wage than others.
I’m not much of a humanitarian, but I watch a movie (Walmart: the high cost of low price) recently in my sociology class. It was incredible to see the methods of exploitation Walmart uses on its employees. The average Walmart employee (non-manager position) earn very low wages. So low that these employees struggle to afford the insurance that Walmart offers. Since they cannot afford it, they go to the government for support. If they use the government for aid, the money used to support them comes from tax payers pockets. As, what i found to be more amazing was the fact that some managers actually encouraged work to turn to the government for support. It seems that, even though prices seem low, we will be paying for it in another way.
I saw something about percentages of profit. I can understand making a small percent of profit on food, but Walmart makes the most money on manufactured goods, like toys and clothes. The movie gives an example of a toy car, which sold for $14.95 but cost $0.19 to make (if my math is correct 7800% base profit, excluding shipping and other costs). They are able to do this by exploiting outsourced jobs. Walmart uses China to manufacture toys and cloths for very cheap. On average these worker make $3 for 12 to 15 hours of work. They also live in dormitories which they are forced to pay, even if they find some way to move out. These people are treated like machinery.
These are only a few points that this documentary highlights. Other topics are about walmarts effects of unions, small towns, and Walmart in European countries. Now on a personal note, I am a Psychology major/ Sociology minor. What I have learned, through my studies, is that you have to understand your personal situation then take a step back and view the big picture in which you are a part of. SO, when I see these low prices, I see hidden costs and exploitation of live. I will never shop at Walmart again and I hope that Walmart will be dismantled by the government, because they are a monopoly.
Finally, I would like to say that I am not trying to attack anyone on the topic. There are positives and negatives to every situation, and I believe that there are more negatives in this situation. Also, please if you have the time to watch this documentary (Walmart: the high cost of low price) it is great and sheds some light on the walmart situation.
And what I have learned through my studies is that every action has opportunity costs. So the question you should be asking is not whether there are hidden costs and social exploitation present. Rather, you should be asking yourself if the workers would be better off without Walmart. By dismantling Walmart, instead of receiving low wages, they would become unemployed and earn nothing. Similarly, the sweat shop workers in underdeveloped countries would lose their jobs too and have to switch to more dangerous and less paid jobs. For example, the elimination of child labour in sweatshops might be obtained at the cost of increased child prostitution. You need to be aware of this before advocating a policy.
A lot of people assume that by using force to eliminate activites that are, for whetever reason, considered undesirable, automatically something that is more desirable would replace them. This method of argumentation is flawed, the implication does not follow.
The job of an economist shouldn’t be to make judgements about people’s actions, rather to try to determine and explain the consequences thereof.
Your view is understandable. I’m guessing you have a background dealing in economics. These two views are quite different. I’ve only taken the basic college economics class so my knowledge is limited. From what I understand, economists tend to favor a free market, where producers’ and consumers’ selling and buying behaviors is only effected by the forces of supply and demand. Moving into a community and bankrupting any other opposition sounds like a market controlled buy Walmart. Walmart is an “everything” store. Why go anywhere else when everything is at Walmart? Add this mentality with low prices and employee discounts, and all consumers buy only one producer’s product, creating a single player market.
Now you said something about child prostitution. Yes this problem is significant. From what I have read and studied about this topic, is that most of these child don’t willingly go into these “professions”. Most of the time they are kidnapped then sold in to child slavery and prostitution, or are born into brothels. The responsibility to prevent this problem shouldn’t have to be held by children in sweatshops. Their government, parents, and interest groups should prevent exploitation of children.
Now this is where we differ. Studying humanities means that I focus on the human condition, what is true about human behaviors and ideals about human behaviors. You, with a background of economics, tend to focus on what is more economical, efficient, and what is least costly to both consumers and producers. Some methods of efficiency (child labor and human exploitation) I view as inhuman. Both of our fields of background can express truths about the world, but we are neither right nor wrong. I can understand your view, but I just can’t support Walmart when I could just as easily send my money to small business and other business that might cost me more, but the my personal opportunity cost is different then yours might be.
Whether you or me consider a certain state of affairs good or bad is a separate issue from whether the proposed change would cause an improvement thereof. I was addressing the latter, not the former.
In a free market, the only way to make people behave in a way you want is to provide them something in exchange. It is an apriori beneficial transaction for both sides, each gives up something they value less in order to obtain something they value more. In a free market, the fact that people are employed by Walmart or by a sweat shop means that they consider the alternatives less valuable. If Walmart wants to bankrupt other businesses in the same area, it needs to provide a more satisfactory shopping experience (e.g. lower prices) to their customers as well as more satisfactory employment experience to their employees. The fact that some people do not like the outcome is not a very good indicator of whether the outcome is good or bad. Any activity whatsoever will cause someone to be unhappy about the outcome.
The only alternative to the free market approach (economic means) is to use violence in order to force some people to exchange things they value more for things they value less. Sometimes this is called the political means.
Although many economic schools use the efficiency argument, the Austrian School doesn’t. If you want to buy in a locally owned shop instead of Walmart, that is your free decision and does not invalidate my argument. Rather, it affirms it, precisely because you consider the outcome more beneficial. The objections I brought up have nothing to with your goals, rather with your means. There are two aspects to this: first is that the methods chosen might be counterproductive (I addressed this in my previous post) and that they involve the use violence (I adressed this in the previous paragraph).
Even if I assumed the problems you described were valid, you address the symptoms rather than the causes thereof.
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