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What About the Documentary Expose that is Being Shown on Campus on 11/17? Consider WHO and WHY the Outcry: 1.Wake Up Wal-Mart" is a project of the United.

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Presentation on theme: "What About the Documentary Expose that is Being Shown on Campus on 11/17? Consider WHO and WHY the Outcry: 1.Wake Up Wal-Mart" is a project of the United."— Presentation transcript:

1 What About the Documentary Expose that is Being Shown on Campus on 11/17? Consider WHO and WHY the Outcry: 1.Wake Up Wal-Mart" is a project of the United Food and Commercial Workers International Union. 2."Wal-Mart Watch" received start-up cash from the Service Employees International Union. These are not manufacturing unions, but nonetheless criticize Wal- Mart for exporting factory jobs Groceries pay wages and benefits 50% better than other retail sector jobs – because they have been union dominated. Recall the Hicks-Marshall laws – unions will be more effective organizing in sectors where sector product demand elasticities are low (i.e. consumers need food, so will pay regardless of the price) Grocery workers are not losing jobs to China, but are being outcompeted by other American workers. 3.These same unions and their supporters are even trying to stop (socially conscious) Whole Foods from entering Eugene, OR despite its reputation for creating new jobs in domestic organic foods sector.

2 What About the Documentary Expose that is Being Shown on Campus on 11/17? But there were some bad stories in the video: 1.I have no doubt that some people have been discriminated against. It is harder to believe that a corporation that employs 775,000 women and 208,000 African Americans and 139,000 Hispanics systematically discriminates against them. Wal- Marts customers are equally diverse. Consider: Wouldnt a greedy competitor make enormous profits by hiring those that have been systematically discriminated against and paying them what they are worth and promoting them to the appropriate levels? Consider: If true, it would be reprehensible – no argument here. This is why we have labor laws and a court system. However, Is this expose truly unique to Wal-Mart? Some believe that it happens here at Centre. 2.But working conditions are abysmal - claims are that Wal-Mart has abysmal labor standards, including its poor compensation, difficult working conditions, and effective strategy to remain union free. Consider: you can go to Wal-Mart and see for yourself. This is not the Gulag. Consider: If working conditions are at the sweatshop level, and if mobility in the U.S. is as high as ever, why do people remain working there? 3.The movie ends with a victory showing an empty warehouse store. Im sure it is moving to the anti-Wal-Mart supporters. Is this really progress? How is this helping the community? What is the alternative?

3 Wal-Mart is a Giant and is Taking Over (Just Look at the Movie Advertisements) – Part 1 1.Wal-Mart employs almost 1.3 million workers, while large, it is still about 1% (1 in 100) of all American workers. They do not have control of the labor market – they are competing with hundreds and thousands of other employers. 2.If you believe Wal-Marts size is bad because it has undue political influence, shouldnt one raise the question about the size of the government? Ask yourself which is a bigger giant, your government – which you have little choice among, or Wal-Mart – a retail center that you can choose to patronize and work for or not? 3.Companies grow when consumers value the products and services and when employees wish to work there. Traditional supermarkets and retailers must not be satisfying one or both. Nonetheless, Wal- Marts competition will force traditional retailers to develop better services and provide more value to their customers.

4 Wal-Mart is a Giant and is Taking Over (Just Look at the Movie Advertisements) – Part 2 1.Wal-Mart's stock price has been static for four years – if a company were poised to take over the world and reap enormous profits from doing so, this would not happen. This is as sure a sign that Wal-Mart too faces stiff competition and this competition will continue to limit its opportunities. 2.As Russ Roberts has said, this is the Land of the Boobies theory of Wal-Mart. Just as Pinocchio is enticed to leave school with goodies and treats and is ultimately transformed into a donkey and enslaved – so too do people naively want to work for Wal-Mart when they set up shop. Then soon the whole town is destroyed with no businesses – no other places to shop or work. Then, evil Wal-Mart jacks up prices and clamps down on wages because people have no alternatives. Consider: What about Wal-Marts slogan? Consider: Somehow people just STAY there when things get this bad? In 2005, mobility is much higher than ever. Consider: This is ultimately an empirical question, though I have yet to see a town turn into this mythic imprisoned ghost town.

5 Arent Wal-Marts Wages Too Low? 1.They are too low for me, so I dont work there. 2.I bet they are too low for you, so thats why you probably do not work there. 3.Why do these low wages make people that do not work there angrier than those that do? 4.Consider: If Wal-Marts wages, benefits and working conditions HURT workers, why do people choose to work there? It HAS to be the case that Wal-Marts packages are better than the alternatives available to these workers. So, Wal-mart MUST make employees better off than whatever opportunities they would confront without Wal- Mart. Wal-Mart creates opportunity for less-skilled workers that would have fewer opportunities otherwise. 5.Wal-Mart is vilified for entering low-income rural areas. It creates better jobs and increases the availability (and lower prices) of goods and services. Would lower- income areas be better served if expensive organic groceries opened up, Tiffanys set up shop, etc.? 6.Well, no one can live on only $9.68 per hour. Thats $19, 360 per year. Clearly the people working there CAN live on this. 7.Is it Wal-Marts fault that many workers are only able to work jobs that pay this little? Is Wal-Mart responsible for the choices that individuals made earlier in life and are making today? Is Wal-Mart responsible for the poor quality of schooling its workers attended? Is Wal-Mart responsible for the poor parenting some of its workers received? Or the bad luck they might have incurred in life?

6 Wal-Marts Wages are So Low Because it Free Rides on Government Welfare and Health Programs 1.Fundamentally an empirical question that has started to be answered – see attached slides 2.The anti-Wal-Mart movie sites list a dizzying array of facts about how Wal-Mart employees make use of public assistance. Consider: Why are they not listing similar facts for other low-wage employers? Consider: If there is an opportunity to take advantage of these programs, would you expect any employer not to do it? Is this an indictment of Wal- Mart or of the design of the programs? 3.Here is what HAS to be true in order for the presence of Government benefits to allow Wal-Mart to pay low wages and benefits: It must be the case that the presence of government welfare programs increases the supply of workers (for any current level of the wages, the existence of welfare makes MORE people want to work at that wage, so firms can lower wage offers and also hire more workers)

7 Wal-Marts Wages are So Low Because it Free Rides on Government Welfare and Health Programs Why is this necessary – accusations such as these are akin to saying that welfare creates Wal-Mart's supply of labor (is there some contradiction now between being anti-Walmart and pro-welfare state?) Their thought goes, without welfare, wages at Wal-Mart are too low, so no one would work there for fear of starving – Id rather starve without working. The presence of welfare enables workers to stay alive and hence enables them to accept horrible Wal- Mart jobs. So, absent welfare, the amount of money workers need would increase and theyd then force Wal-Mart to pay more. In order for Wal-mart to be paying its workers more, two conditions must be true: 1.These workers must be productive enough so that they are worth that much to Wal-Mart – otherwise Greedy Wal-Mart couldnt pay them this much. (e.g. they must generate $10.00 per hour in revenues in order to be paid a wage of $10 per hour). 2.Other businesses MUST be in competition for these workers – otherwise, Wal-Mart could lower wages with no fear of workers leaving. The fact that Wal-marts workforce is not unionized supports this claim.

8 Wal-Marts Wages are So Low Because it Free Rides on Government Welfare and Health Programs What about welfare then reduces the ability of workers to earn high wages? 1.It must make them less productive (e.g. once on Welfare, you are only able to produce $6 worth of services per hour). Then wages will fall, but there is no net benefit to Wal-Mart. 2.Welfare must reduce the competition from other companies for these workers. Well, I cant think of why this would be true – and if the story that companies free-ride off of government welfare payments is true – then MORE companies should be competing for workers when welfare exists. 3.If (a) or (b) do not hold, as is likely true – then it must be the case the workers on welfare DO NOT WANT to earn as much as possible. Kroger offers me $9.00 per hour, and Wal-Mart only $8.00 per hour, since I am getting government benefits then I do not need the higher Kroger wage, Ill let Wal-Mart continue to pay me the lower wage. (4)ALL of the empirical evidence in labor economics (practiced by economists of all political stripes) must be wrong. Empirical research shows unanimously that government welfare programs reduce the supply of labor, raising reservation wages – and therefore must raise the wage that Wal-Mart pays to attract the workforce it desires.

9 Local Governments Give Wal-Mart Tax Breaks to Come In 1.This is something we should penalize Wal-mart for? 2.The breaks are typically available for all stores with the potential to improve local economies – what other rationale is there? 3.Arent local citizens in control of local government? Shouldnt we be questioning what these officials are doing if we find this offensive? The movie shows a grocery store owner that didnt get the same breaks as Wal-Mart. I certainly sympathize with the owner. If it were me I would be extremely angry. However this is a political failure not a Wal-Mart failure. As earlier, doesnt this type of failure lead us to question how much money and power rests in the political arena and outside the individual arena?

10 We Dont Want to Eliminate Wal-Mart, We Just Want Them to Pay More. Cant Wal-Mart Pay More? 1.For starters, Wal-Mart does not pay many of its workers minimum wage. Its average wage for full-time hourly workers is $9.68 per hour (the minimum wage is $5.15). 2.So, firms that pay higher wages are moral and nice while firms that pay lower wages are immoral and not nice? Ask any of your professors whether they would be paid more at Amherst or Centre (and why)? I doubt that theyll attribute the answer to Amhersts keener sense of social justice or kindness. 3.Wont higher wages decrease employee turnover, reduce H&T costs and increase profits? Perhaps, but would you want the government mandating this, or Wal-Mart executives to figure it out. If higher wages increase profits, why have they not yet tried this? 4.Wal-Mart doesnt pay more or offer health insurance to everyone because it can attract the size and quality of workforce it wants at current compensation levels. For other companies, they have to offer health benefits to attract workers. The reason they offer health insurance isn't because they're socially responsible or kind or altruistic. They find that to compete for workers they have to offer it. 5.Ask yourself, are there really a bunch of greedy fat cats sitting in a board room plotting to keep worker wages low? Yes, employers want to keep labor costs as low as possible. However, Wal-Mart does not in any real sense set wages. Again, ask your professors, how much could you sell your house for? I know that houses similar to mine in size and location sell for about $1. Im free to set any price I want on my house, say $2, but if I do, I will wait a long time for a purchaser to come along. 6.Doesnt Costco and Sams Club pay higher wages? Yes they do. This is because the level of skills and/or knowledge and/or customer service they choose to offer is higher than at other places. Not because the CEO of Costco is a nicer guy than the CEO of Wal-Mart. 7.Efforts to increase wages or benefits will punish the people you are trying to help. Demand curves slope downward – and while you will see those that remain employed making more money, what you will not see are the lower wages elsewhere in the economy, or the workers that are unable to find a job. 8.Of course, Wal-Mart still COULD pay more, a little bit, but so too could Centre. The voluntary transactions between Wal-Mart and its workers generate surpluses for both. Too much surplus to workers will lead to more workers competing for these jobs. Too much to Wal-Mart and new firms would compete Wal-Mart off the map.

11 Wal-Mart and Other Greedy Corporations Obsessed with Profits, Threaten all American Ideals that are at odds with profits – justice, equality and fairness. 1.I am sorry of this is something you truly believe. 2.Is it true that behavior is either altruistic or greedy? Either you are motivated by profit or the opportunity to help others. 3.Consider: Why might a vet clinic offer free immunizations to new customers once per year? Did the Bayer Company in Germany create aspirin because it loved people? Would Bill Gates be doing more good for the world had Microsoft not generated gargantuan amounts of profits? … this list is infinitely long … 4.How are we better served by a world without these greedy profit-obsessed corporations? What is the alternative model? Wages will be higher somewhere else? They are not there now. 5.Consider: Would citizens in the wake of a natural disaster be better served by greedy-profit seeking companies or by agencies that do not face the rewards carrot of profits and the penalty stick of losses? Would citizens be better able to afford social insurance programs, public schools, public highways, environmental improvements, etc. when individuals and corporations make large profits or when we are collectively less wealthy? Wal-Mart is criticized for expanding outsourcing activities. Are socially compassionate people ignorant of the fact that anti-globalization movements are the same as saying, US workers are more important than foreign workers. You may want to believe that, but doesnt that go against the idea of social justice and equality?

12 Wal-Mart Exports Jobs Overseas 1.For the sake of consistency, if you believe that it is bad for people to save time and money by outsourcing goods and service production overseas, for example, by having people in India prepare their income taxes, then you should very seriously oppose people saving time and money by using software to do their taxes. 2.The inconsistency demonstrates a lack of appreciation for what Joseph Schumpeter called the process of creative destruction. We should applaud Wal-Mart if it is able to deliver goods and services more cost effectively than its competitors – that is the essence of doing business and it has been going on for centuries. Should we demonize IBM and Microsoft for making word processing possible on our desktops? After all, think of all the typewriter repair men, factory workers, retailers and wholesalers that have been put out of business because of it? As with technical improvements, the benefits of outsourcing are widespread and large (we all enjoy lower prices and a larger array of goods), while the losses are acute and smaller (some people do in fact lose their jobs). It has long been a mystery why people view creative destruction coming from technology to be ok, but not from other activities. 3.Ask yourself, is the alternative better? Protectionism serves to enrich entrenched interest groups. We're supposed to be against that. Protectionism is state sanctioned thievery of the consumer, and both the poor and rich alike are fleeced.

13 What Good Does Wal-Mart Do? 1.Again, lets focus on the economics – you can look at Wal-Marts websites to see specific examples of good things they do. 2.By finding a way to lower the prices that consumers face, they free up consumer resources to spend on other items and services, or to save, which expands businesses and investments and creates employment in other areas. For example, I save approximately $120 per month by shopping for groceries at Wal-Mart instead of Kroger. I use half of that money to save for my daughters arrival and I use the other half on pet-care procedures for my many animals (e.g. dental work and better food). 3.Retailing is all workers, not much place for technology or machinery – but Wal- Mart found a way to use computers to reduce inventory costs and smooth the supply chain process – to a tremendous improvement in the U.S. wealth – stuff gets from factories to our homes much more cheaply and quickly today than in past. So while Wal-Mart cannot manufacture clothing more cheaply, its AS IF theyve found a cheaper way to make clothing. 4.Wal-Mart is vilified for the demand it places on its suppliers. However, these demands encourage businesses to supply things more cheaply and it makes them work harder and continue to innovate – this is exciting and a good thing for all of us. Think of how well some other institutions are run absent these sorts of competitive pressures.

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