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A Different Take on Wal-Mart- A Tale of Two Hats

Move On posted a blog about Wal-Mart. Here is a different perspective. We all wear two hats, one of a worker, the other a consumer.

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.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Arthur Huff November 25, 2012 at 05:42 PM
EXCELLENT article, John. EXCELLENT! I don't know how any sane person could argue with a single word you wrote without starting with "yeah, but." I commented with some similar points on the original article you referenced. You hit the nail squarely on the head with this one. And I suspect not many people will comment on your article because they will have a tough time arguing with it.
Bob November 25, 2012 at 07:47 PM
Good points, John. The fact is that we need both "living wage" and LEARNING wage jobs to have a fair and functioning economy. Teenage HS grad (or dropout) starting value is very low, probably under $9 for most. Once they earn a few paychecks, they should start thinking about what they need to do to increase their value, be it education or training. IF they do the right thing, they progress, make more money and earn a LIVING wage, then, hopefully, a PROSPEROUS wage. When I used to teach HS and college, I used to tell my students that America was one of the few countries where properity was virtually certain in you did four things...STUDY HARD....WORK HARD.....SAVE HARD.....INVEST SMART! I have yet to meet a person who, absent catastrophe, hasn't become prosperous with those four simple steps. Too many are looking for "short cuts" around those steps, such as those complaining about their wages. I've never complained in my 40 working years about how much I was paid. If I didn't think I was being paid commensurate with my value, I went somewhere that I would be. It's a pity that public sector workers, especially teachers, don't have that same cultural imperative.
paul cervenka November 26, 2012 at 02:04 PM
30 years ago the buying public told Sam Walton the price point they wanted from his stores. He set his business model to that. Cheaper prices not living wages. We all voted with our dollars. Jobs gone, cheaper goods. Happy? Sam doesn't pay living wages even though he can (40 million in profits per day) because he does not want people working there as a career. His model is, work there part time, earn a few dollars and move on with your life. The wages promote that. In this zero growth economy there are people living on those wages, and less. When you spend, your voting for that product and company. Don't like it, vote elsewhere.
Dinkamoe November 27, 2012 at 06:20 PM
Great article! Yes, businesses only exist to make a profit and provide ROI for their investors. If you want to make more money, make yourself more valuable by developing skills and increasing your education. But here comes the but.....companies like Wal-Mart, that make billions, are being subsidized by the government when their workers do not make a living wage. These people qualify for food stamps, section 8 housing, the earned income tax credit, etc, at a cost to the tax payers, thus saving the company an obsecene amount of money in pay and benefits. Because of this, this increases the amount of money available for dividends, executive bonuses, and company stock buy backs. Trickle down economics is backwards. It actually works the other way. There IS a massive wealth redistribution with the current system, but it redistributes the wealth from the poor and middle class to the wealthy and corporations.
John Paul November 29, 2012 at 03:37 AM
Based on that logic, if I hire a guy to mow my lawn every week, I have to pay him $40,000 a year or I'm responsible for him being on food stamps. If you need to make a living wage, you need to obtain the skills and education needed to accomplish that. Most of these jobs aren't made for people who have to support a family, their generally held by folks who want to earn some extra money, like a retiree or a teenager.
Dinkamoe November 30, 2012 at 08:53 PM
Yes, of course. People do need to make themselves more marketable. However, there is a difference in bargaining power. Mowing lawns is different than having a full time job at Wal-Mart. Wal-Mart is being indirectly subsisized by the government when their employees qualify for food stamps, section 8 housing, the earned income tax credit, etc. As such, they should be forced either to increase their pay and benefits, or have their profits taxed more heavily to reimbures the government for their employee's goverrnment welfare benefits.
John Paul December 01, 2012 at 05:45 AM
Think about it this way, Dink, the Wal Mart business model is: minimal expense, lowest possible price, thin margins, make it up with volume. This leads to maximum profit. Now here comes the liberal dillema; the more profit a company earns (bad) the more income taxes they pay (good). It's like chocolate covered broccoli. If Wal-Mart raised their employee compensation, they would have to raise their prices, which would result in lower volume. That would likely cause a loss of profitability (lower taxes) and a loss of jobs (more people dependent on government benefits).
Dinkamoe December 03, 2012 at 04:30 PM
Yes, it is a catch-22. Bottom line, people do need take responsibilty to make themselves more valuable and marketable. They seem not able or want to do that. How many people working at Wal-Mart subsidize themselves by taking diapers, formula, etc? I wonder what their inside shoplifting theft numbers are?

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