Friday, December 20, 2013

Minimum morality: Walmart wages war

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Lately it has become popular to talk about how Walmart pays its employees so little that they have to organize food drives for themselves and depend on public assistance, burdening taxpayers. Journalists have railed against Walmart's moral depravity for providing such low compensation. Set aside questions about how to define "low" wages (e.g., why do so many people apply for these low-wage jobs? How do they stack up in international context? etc.). Even if we all agree to call Walmart's wages "low," the system of morality that is motivating these attacks is puzzling. If paying low wages is a sin, it's a sin of omission--and we're all guilty.

Walmart employs 1.2 million people in the US, more than any other private firm. Why is Walmart any more obligated to pay high wages to 1.2 million people than you or I? Does Walmart's decision to provide jobs for these people automatically obligate them to provide pay above a certain level?

What makes this complicated is that you, these journalists, and I employ zero people (or close enough by comparison), which means we effectively pay 1.2 million people a wage of $0/hour.

Walmart critics embrace two moral standards: in the first, morality requires payment of high wages to 1.2 million people. In the second, morality can be achieved without employing anyone at all--that is, by paying zero wages. Most of us have chosen to live by the second standard, and from our lofty moral position we can criticize Walmart for not meeting the first standard. How convenient!

In other words, according to the system of morality embraced by the Walmart critics, Walmart could "rise" to our level of morality by either (a) raising pay to some arbitrary level preferred by the critics or (b) reducing the wages of their 1.2M employees to $0/hour, thus choosing the standard of morality that the rest of us prefer to apply to ourselves. Of course, option (b) means that those employees would leave Walmart--but that's the point. Then Walmart would be equivalent to us. Somehow I don't think the workers would be any better off, and it seems likely that even more costs would be passed to taxpayers as the ranks of the unemployed swell, but at least then the Walmart shareholders would no longer be the target of the critics and could instead join us in sanctimoniously raising awareness of some other huge employer's moral depravity.

It's a funny sort of logic that says that Walmart "transfers" poverty assistance costs to taxpayers by paying workers less than some journalist thinks they should be paid. On an employment-weighted basis, Walmart is less guilty of paying low wages than is anyone else on the planet. If taxpayers have an obligation to provide a safety net (and I think we do), then the system works exactly as it should: Walmart pays people an amount roughly requisite with their marginal contribution to the firm's revenue, keeping them off of unemployment and enabling the miracle that is the Walmart business model to deliver goods to the poor and middle class at prices lower than they would otherwise be. Meanwhile, the government picks up the residual of the workers' needs. It's just as accurate to say that Walmart is picking up part of the tab for the safety net (by providing jobs for the otherwise unemployed, not to mention low prices) as it is to say that taxpayers are picking up part of the tab for Walmart wage policies. The two statements describe the same reality.

This is the social safety net. This is the setup that progressives have demanded, yet they complain when it is used. Focus on making a more efficient and effective safety net, and let Walmart make its own factor payment decisions.

6 comments:

  1. I have noticed that for many people, morality is only a standard used to lecture the rest of the world on how it should be. It is NOT a standard of conduct to which the person in question must conform himself.

    I think that is a big part of what you have observed vis-a-vis the public commentary on Walmart.

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  2. Arguments against WalMart also neglect the fact that WalMart customers are a poorer and needier demographic than WM employees (many of whom are retired-with-pensions and/or married to someone earning more than they do).

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  3. Um, I don't know about you, but when I pay 1.2 million people $0/hr I also don't expect them to do work for me. There may be something wrong the targeting of walmart that you refer to, but it's not at all contradictory to think that morality requires that if you employ someone (ie, claim ownership of the products of their labor) you are morally required to pay them a certain amount, but if you don't employ anyone you aren't required to pay them anything.

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    1. Ummmm. I think you need to think this through - if I read you correctly, I would be morally obligated to pay the single mother who is raising three children more than the retiree who is working to make a little extra money to be able to buy top shelf bourbon rather than Heaven Hill or such. He/she also likes working to be out and about rather than sitting home watching Oprah and Dr. Phil - and would work for less than the minimum wage if he/she could

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  5. phammond's argument has some merit (at least intuitively), but it becomes tough to support when it runs up against the reality of marginal productivity vs. marginal cost for workers. Would Wal-Mart exhibit greater "morality" by paying its workers a larger amount but replacing 10% or more of them (on an FTE basis - i.e., fewer total labor hours) through the use of automation and business model changes (e.g., increasing use of automatic check-outs, putting some products out on pallets rather than stacking on shelves, etc.)? That pretty clearly implies not offering jobs to some people it would otherwise employ - i.e, paying them $0. And most of Wal-Mart's critics would howl loudly if Wal-Mart announced that it would increase its employees' wages but would also lay-off 15% of its workforce as part of that plan.

    A second critique is that most - not all, but most - people who advocate for elevated minimum wages are hypocritical about their own spending. (I'm talking direct spending, without even getting into indirect effects like whether they're willing to pay more at a restaurant or retailer to support higher wages.) How many of the people advocating for a $10 to $15 per hour minimum wage think that's what they should be required to pay a babysitter? (If they do think people taking care of children should be paid that much, it's because they think that the government should pay for "free" childcare with someone else's tax dollars.) Or think that's the minimum wage that an elderly pensioner should have to pay a neighborhood kid to cut the grass?

    In either case, these critics succumb to a particular sort of left-wing magical thinking in which "corporations" or the "rich" (or, more generally, someone else) pays for these higher wages without any second order effects. That's a fantasy.

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