(Don’t blame me for the lousy photo-shopping. Eduwonkette did it. But I told her it made me look like David Byrne in his giant suit. Pretty cool!)
David Kinkade at the Arkansas Project alerted us to this piece by Charles Platt, a writer at Wired Magazine, on his experience going “undercover” to work for Wal-Mart. Platt writes:
” I found myself reaching an inescapable conclusion. Low wages are not a Wal-Mart problem. They are an industry-wide problem, afflicting all unskilled entry-level jobs, and the reason should be obvious.
In our free-enterprise system, employees are valued largely in terms of what they can do. This is why teenagers fresh out of high school often go to vocational training institutes to become auto mechanics or electricians. They understand a basic principle that seems to elude social commentators, politicians and union organizers. If you want better pay, you need to learn skills that are in demand.
The blunt tools of legislation or union power can force a corporation to pay higher wages, but if employees don’t create an equal amount of additional value, there’s no net gain. All other factors remaining equal, the store will have to charge higher prices for its merchandise, and its competitive position will suffer.
This is Economics 101, but no one wants to believe it, because it tells us that a legislative or unionized quick-fix is not going to work in the long term. If you want people to be wealthier, they have to create additional wealth.
To my mind, the real scandal is not that a large corporation doesn’t pay people more. The scandal is that so many people have so little economic value. Despite (or because of) a free public school system, millions of teenagers enter the work force without marketable skills. So why would anyone expect them to be well paid?
In fact, the deal at Wal-Mart is better than at many other employers. The company states that its regular full-time hourly associates in the US average $10.86 per hour, while the mean hourly wage for retail sales associates in department stores generally is $8.67. The federal minimum wage is $6.55 per hour. Also every Wal-Mart employee gets a 10% store discount, while an additional 4% of wages go into profit-sharing and 401(k) plans.”
He then concludes:
“Based on my experience (admittedly, only at one location) I reached a conclusion which is utterly opposed to almost everything ever written about Wal-Mart. I came to regard it as one of the all-time enlightened American employers, right up there with IBM in the 1960s.”
So, the path to higher worker wages is improved education, not unionization? Luckily the unions do so much to help improve education that I guess we are in great shape!
Jay P. Greene's Blog 
Left-wing commentators hate Wal-Mart because that store makes a profit off of helping poor people lead a better life.
And speaking of earning new skills, here is a school that is probably better than Harvard: http://www.apprenticeschool.com/
You get paid to learn a skill working in the Newport News Shipyard.
Already have a BA degree? They have a quick program that lets you become a draftsman in 1 year. You earn $24,000 and your tuition is free. If you’re a really great student they’ll pay for you to get a full blown engineering degree at a 4 year university while you keep your salary.
Wal-Mart also once had an excellent profit sharing plan.
Each store was its own entity and employees shared in a percentage of profits the store made. Accidents that occurred in the store, or other extra costs were deducted from that stores profits.
This gave a strong incentive for employees to work safe and keep the store safe for customers. It also incentivized them to work hard and keep the store organized.
The backroom had a chart that told them what there bonus would be at the end of the year.
That is all gone. Wal-Mart hired some Harvard MBAs(Don’t hire Harvard educated people for business related enterprises where they have to make critical choices) and they complicated the process with a complex math formula that pushed sales over profits (a Stupid Enron like ploy to push up stock prices).
I think the Harvard bonus plan will ultimately hurt Wal-Mart but that is another story.
The manager of the store I worked at while trying to put myself through school was a high school grad. Had 0 years of college education and had worked his way up from mopping floors at Wal-Mart to managing the smallest yet most profitable store in the country (no lie there).
He netted an income of more than $250,000 a year including his bonus.
I read a very interesting book about Wal-Mart recently: “The Wal-Mart Effect” by Charles Fishman. It described the history of the company from its inception decades ago to its current status as the largest company in the history of the world.
After I read the book, I no longer believed that union-bashing was the biggest problem stemming from Wal-Mart. The biggest issue appears to be the pressure the chain exerts on its suppliers to ensure lowest possible prices (with the slimmest of profits per unit). This forces many companies to eventually move their operations overseas, and increases the pressure to skimp on areas like environmental concerns. Unionized or not, the wages that must be paid to American workers are more than Wal-Mart suppliers can pay and still keep their costs low enough to satisfy Wal-Mart. I’d recommend the book: It’s a very interesting read.
In an earlier post (https://jaypgreene.com/2008/06/06/walmart-shareholder-meeting/ ) I suggested that a central part of Wal-mart’s success was keeping the costs of items from suppliers down so that they could keep prices down.
But rather than seeing this as a bad thing, as I think Attorney DC does, I see this as a good thing. Low prices help poor people buy food, clothing, and other basic goods. If the government had a program to deliver these items to poor people at low cost, we would sing its praises.
To denounce Wal-mart’s low price strategy is like rooting against poor people and for larger profits for P&G, Kraft, and other corporations. This hardly seems “progressive.”
And if you blame pressure from Walmart on suppliers to be more efficient as the cause of moving jobs overseas and harming the environment, then is the solution to encourage less efficiency from companies? Sounds like the solution would then be to over-charge the poor, fatten supplier profits, and have a horribly inefficient retail system so that we could protect jobs and the environment.
Jay: Good to hear from you; thanks for responding to my comment above. In my opinion, whether Wal-Mart’s price-lowering effects (including the effect of encouraging suppliers to move manufacturing jobs overseas) are positive or negative depends on your perspective, I suppose.
The positive side of low-prices is that lower-income Americans can buy items, like groceries, at lower costs. The negative side is that many Americans will ultimately lose their manufacturing jobs (note: jobs connected to those industries may also disappear – for example, a diner next to a closed factory). Another negative discussed in The Wal-Mart Effect is the impact on environmental pollution. The countries that take on the manufacturing jobs that left the U.S. usually have fewer safety and environmental regulations than America does. One example is the salmon fisheries off the coast of South America, which according to the book are polluting the oceans to a degree that would not be tolerated on a U.S. shoreline. It’s all a matter of what you think is important, and which player in the scheme of things that you are.
This may be accounted for, but don’t most retail sales associates in department stores work for some combination of wages and commissions? Could that affect the $8.67 figure?
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