This piece is in response to a recent blog by our friends at Move On condemning Wal-Mart for making people work on a holiday. The article, as well as many of the comments, also took Wal-Mart to task for how it pays its employees.
I'm not here to defend Wal-Mart, a company that I have no vested interest in. What I want to do is to help our friends on the left understand the realities of business in America.
The first thing to understand about compensation is that it is relative to consumption. In other words, we tend to think of a hundred thousand a year as a comfortable income, right? But what if a loaf of bread cost ten dollars, or a gallon of gas was thirty dollars? A person making a hundred thousand dollars would go broke in a hurry, wouldn't they. Looking at it a different way, if a loaf of bread was five cents and a gallon of gas was a quarter, ten thousand a year would be a pretty nice income. Some of you might remember when that was a nice income.
Here's the thing with Wal-Mart, as well as other discount retailers; the reason people shop there is because their prices are the lowest. Not for the ambiance or the high end merchandise, no, just the prices. In order for a discount store to be able to charge the lowest prices, they have to reduce all of their costs, including wages. If they paid more money to their employees, they would have to charge more for their products. If they did that, they wouldn't sell as much. That would result in fewer jobs.
See, we all wear two hats. As workers, we want wages to be high. We want strong demand for American made products. We know those things positively impact all workers. But, we also wear the hat of a consumer, and as consumers, we want the best value for our dollar. Let's be honest here, if you could go to Sears and pay $200 for an American made product or buy the same product, made in China, at Wal-Mart for $50, what would you do? It's why you see Hondas parked at Wal-Mart with Proud To Be Union bumper stickers.
This is especially true for lower income people. Buying at Wal-Mart may be the only option to not buying at all. So while Wal-Mart is criticized for "hurting" a few poor workers, it increases the buying power of thousands of poor consumers.
The other point that I don't understand is the logic that everyone worker should make a comfortable living. First, that's not even possible. If Wal-mart paid every employee $20 an hour, its prices would go up. So would other retailers who would also have to pay $20 an hour to hire people. Some of those employees would end up losing their jobs because demand for the products they sell would go down. The others would soon find that $20 an hour would become poverty level.
I hate to be the one to break it to all those folks out in left field, but businesses exist to make a profit. Yup, a profit. All of those other wonderful things that businesses do, like hire people and pay taxes are a byproduct of making a profit. No profit, no taxes; no profit, not employment. If you believe differently, start writing letters to Santa. Or the Great Pumpkin.
I also hate to say it, but not every job warrants a comfortable living. That's why so many of the people who work at Wal-Mart are teenagers who live at home, seniors who receive social security and/or pensions or others who are supplementing their own or their spouse's income. The money they make serves their needs and that's why they like working there. For younger workers, the experience they get at Wal-Mart will serve them well in the future. Besides, if they paid too little, why are there long lines of applicants every time they are hiring?
Wages are determined by supply and demand in the marketplace. The harder it is to find a qualified person, the higher the pay usually is. When wages are forced up, either through unions or law (ie minimum wage), job loss is inevitable. As wages go up, companies replace workers with technology or simply out source jobs to Singapore.
Consumers are only willing to pay so much for products and services. If they can buy it cheaper somewhere else, they will. If not, they'll do without.That's reality folks.
No matter how much we hope for change, that's how things work. If you want more that $9 an hour, all I can say is make yourself more valuable. And if you believe that someone else will do that for you, it may very well be time to write to Santa.