Leave Walmart Alone

In a 17-point Twitter manifesto (my how things have changed), Peter Suderman blows up a lot of the nonsense surrounding the public opinion of Walmart. Here's some highlights (but, seriously, it's only 17 tweets; everyone has time to read that).

1. Walmart’s customer base is heavily concentrated in the bottom income quintile, which spends heavily on food.



2.The bottom income quintile spends about 25 percent of income on food compared to just 3.5 percent for the top quintile.



3.So the benefits of Walmart’s substantially lower prices to the lowest earning cohort are huge, especially on food.



4. Obama adviser Jason Furman has estimated the welfare boost of Walmart’s low food prices alone is about $50b a year.



5.Walmart’s wages are about average for retail. Not amazing. But not the worst either.

His argument in favor of Walmart's business structure is fundamentally sound. By providing prices that are as much as 39 percent less than the competition, Walmart is able to provide substantially more benefits than its critics can recognize. Furman estimated that Walmart's low prices are essentially the equivalent of a 6.5 percent increase in income for the bottom quintile.

But Walmart's wage are low, and no one denies this. In fact, they've been steadily falling, both on an hourly and weekly basis, over the last thirty years. They've also been responsible for the overall decline in wages throughout the retail sector.

Image from Doug Henwood at lbo-news.com 

At the same time, there is very little room to increase the associates' wages without altering prices and hurting the rest of the poor that Walmart serves. 

This leads us to something that is anathema for most libertarians to admit. Since the entire industry faces pressures to lower wages, there isn't a "market solution" to this issue. Nor should there be one. When Walmart alone can be credited for 50 percent of the US's productivity gains over Europe over the last three decades (with supply chain innovations accounting for another 25 percent), the argument about "reorganizing" or "abolishing" Walmart starts to look pretty silly.

Worker organization would be great for job-place democracy, something I've long supported. But it doesn't make sense to force the company into providing comprehensive health insurance, and Obamacare might actually exacerbate the problem. Walmart is redesigning labor agreements that will decrease the amount of insurance plans it provides, while those employees that do have health insurance will see their premiums rise. There's a good chance that these costs will be translated into higher prices, making Obamacare, oddly, into a silent tax on other poor people.

The only way around this problem is more government. Healthcare needs to be provided/ managed independently of companies; we can do this through single-payer or a subsidized mandate, depending on your preference for financing the program. This should be accompanied by stronger subsidies on food and housing, and perhaps even a Latin America-style direct transfer program to encourage people to be active about lifting their families out of poverty.

It's not acceptable for millions of retail employees to live in poverty, but it's not Walmart's responsibility to get them out of it either. It's the rest of us that share that burden, one which we can only solve by working through our shared institutions.

Update: 11/27/12 9:03 Am

The issue with raising wages of the poor that work at Walmat, without increasing them for everyone else, means that the non-Walmart poor are hurt by their relative decline in wages once Walmart increases prices.

You can get around this problem with with a national minimum wage increase. That way, everyone that relies on Walmart's low prices gets a wage increase (relative to everyone else in society), and it doesn't matter too much if Walmart increases prices. Oddly enough, it's something that Walmart supports.

That also just reaffirms the point. Forcing Walmart, individually, to increase their wages won't get us anywhere. A broader, government-backed effort is needed.