Always Low Wages, Not a Problem
The Hidden Columnists--John Tierney Edition (28 Nov 2005)

In which Mr. Tierney offers an alternative view to the griping of lefties like myself who don't necessarily see the value of Wal-Mart's low wages and low benefits to its employees (here's the link to the full column--"The Good Goliath"--for Times Select subscribers):

... Wal-Mart has been one of the most successful antipoverty programs in America. It provides entry-level jobs that unskilled workers badly want - there are often 5 or 10 applicants for each position.

Critics say Wal-Mart's pay, $9.68 per hour on average, is too low and depresses local retail wages when a new store opens. That effect is debatable, but even if wages do go down slightly, these workers still end up with more disposable income, as Jason Furman, a visiting professor at New York University, concludes in a paper titled "Wal-Mart: A Progressive Success Story."

Furman, a former economic adviser in the Clinton administration and the Kerry presidential campaign, notes that the possible decline in wages is minuscule compared with what the typical family saves by shopping at Wal-Mart: nearly $800 per year on groceries alone, a savings that's especially valuable to the many low-income shoppers at Wal-Mart.

The average income of shoppers at Wal-Mart is $35,000, compared with $50,000 at Target and $74,000 at Costco. Costco is touted as the virtuous alternative to Wal-Mart because it pays better wages, but it needs to because it requires higher-skilled workers to sell higher-end products to its more affluent customers.

Wal-Mart is often denounced for getting "corporate welfare" because some of its employees rely on Medicaid for health care and on other government aid. But so do some employees at other companies or at government institutions like public schools. Wal-Mart offers health benefits that are generally comparable to what other retailers offer.

Its size makes it an easy target for enemies, like the Maryland legislators who passed a bill that would apparently affect only one company in the state: Wal-Mart. The legislators in Maryland (and other states) want to force Wal-Mart to either increase its spending on health care benefits or to make payments to the state's health program for the poor.

But suppose Wal-Mart were forced to give health coverage to all of its part-time employees. To remain competitive, Wal-Mart would probably cut the cash wages of the workers to compensate for the additional health benefits. The cut in take-home pay would be particularly hard on the many part-timers who don't need the benefits because they're already covered through their spouses' or other insurance.

Some of Wal-Mart's critics prefer to imagine that Wal-Mart wouldn't have to cut wages - that it could get away with raising prices a little to cover the extra health care costs. But that would force Wal-Mart's shoppers to cover costs previously paid by the government out of revenues coming largely from income taxes, which are paid disproportionately by the affluent. Instead, Wal-Mart's low-income shoppers would, in effect, pay a regressive new sales tax.

It's easy to understand the motives of some of Wal-Mart's enemies. Local merchants don't want to match its prices. Labor leaders know that they'll lose members and dues if unionized stores suffer. But why would anyone who claims to be fighting for social justice be so determined to take money out of the pockets of the poor?