Speaking of the devil (or not): Wal-Mart
I've mentioned Wal-Mart in class as the kind of place where US consumers can buy lower priced imported goods, and therefore how, all else equal, workers' real wages are raised.
But others criticize Wal-Mart for keeping its costs down through other means such as not paying their workers higher wages or benefits, for not having a unionized work force, etc.
So is Wal-Mart a hero or a villain to the poor and the middle class?
Greg Mankiw's blog brings attention to two recent defenses of Wal-Mart, one from the right and the other from the center-left. Conservative commentator George Will begins by telling us that Wal-Mart is the best thing since the invention of sliced bread, and more important to the poor and middle class than government social programs:
P.S. --Many of the campaigns against Walmart aim to pressure it to pay higher wages, to offer its workers more benefits, or to allow in unions. Jason Furman suggests that there are better ways to help those workers and that it would be hard for Wal-mart to do these things because its profit margins are already slim. However "chriswrote" on the Krugman post suggests the intriguing argument that sometimes such campaigns lead companies to introduce new practices that raise worker productivity, and in that sense end up paying for themselves. Interesting argument. Would this argument apply to Wal-Mart as he/she suggests it did in Nike's overseas plants?
But others criticize Wal-Mart for keeping its costs down through other means such as not paying their workers higher wages or benefits, for not having a unionized work force, etc.
So is Wal-Mart a hero or a villain to the poor and the middle class?
Greg Mankiw's blog brings attention to two recent defenses of Wal-Mart, one from the right and the other from the center-left. Conservative commentator George Will begins by telling us that Wal-Mart is the best thing since the invention of sliced bread, and more important to the poor and middle class than government social programs:
The median household income of Wal-Mart shoppers is under $40,000. Wal-Mart, the most prodigious job-creator in the history of the private sector in this galaxy, has almost as many employees (1.3 million) as the U.S. military has uniformed personnel. A McKinsey company study concluded that Wal-Mart accounted for 13 percent of the nation's productivity gains in the second half of the 1990s....Wal-Mart and its effects save shoppers more than $200 billion a year, dwarfing such government programs as food stamps ($28.6 billion) and the earned-income tax credit ($34.6 billion).Mankiw also points to a somewhat longer essay (16 pages) by Jason Furman (a more liberal economist who was Director of Economic Policy for the Kerry-Edwards campaign). The title of the piece -- "Wal-Mart: A progressive success story" -- indicates on which side of the debate he lands, but it is nonetheless a good and fairly balanced review of the arguments and studies from both sides.
P.S. --Many of the campaigns against Walmart aim to pressure it to pay higher wages, to offer its workers more benefits, or to allow in unions. Jason Furman suggests that there are better ways to help those workers and that it would be hard for Wal-mart to do these things because its profit margins are already slim. However "chriswrote" on the Krugman post suggests the intriguing argument that sometimes such campaigns lead companies to introduce new practices that raise worker productivity, and in that sense end up paying for themselves. Interesting argument. Would this argument apply to Wal-Mart as he/she suggests it did in Nike's overseas plants?
Comments
Although I agree with some of Mankiw's arguments I also disagree on others.
Certainly, Wal-Mart's low priced goods do more for the poor and middle class than
government programs do. However this good deed comes at a big cost to nearby competitors.
With its 1.3 million emploees Wal-Mart operates as a monopoly, setting prices and practices that
no competitor can afford. And once competition is eliminated Wal-Mart can set wages and benefits
for its emploees as well. The disturbing outcome is the fact that the great beneficiaries are the executives
and shareholders.