On Wal-Mart’s higher wages.

From the mailbag:

(Blonde) directed my attention to a Gray Lady article that asks “How Did Walmart Get Cleaner Stores and Higher Sales?” and then answers “It Paid Its People More” and then asks “Can the answer to what ails the global economy be found in the people in blue vests at your neighborhood Walmart?” Click here to read it yourself.

Long story short: in 2015, Wal-Mart’s revenues dropped for the first time since God was a child, customer satisfaction was down, and so they decided to pay their employees more. Their revenues went back up while the rest of the retail market was down, and customer satisfaction improved. However, the stock price underperformed and profits dropped a bit.

So is attracting better workers via higher wages the “answer to what ails the global economy”? As any well-trained economist proficient in hedging his bets would tell you, it depends. I suppose that sometimes it is, and sometimes it isn’t.

Maybe Wal-Mart’s experience validates the concept of the efficiency wage. Or, since their profits are down, I should say “may soon validate” the concept. Maybe higher profits are right around the corner. Maybe profits will continue to lag and then there’ll be a hiring freeze, or a wage freeze until inflation eats away the value of the wage. After all, the stockholders are trying to make money, too– maybe for raw profit, maybe for retirement, maybe for a health savings account, who knows why?

I’m not surprised that offering a higher wage brought in better workers, though I would like more elaboration on this little nugget:

But at the store level, managers describe a big shift in the kind of workers they can bring in by offering $10 an hour with a solid path to $15 an hour. “We’re attracting a different type of associate,” said Tina Budnaitis, the manager of Walmart No. 5260 in Rogers. “We get more people coming in who want a career instead of a job.”

If I were a cosmic justice warrior, I might take that bit about “a different type of associate” and play the “what’s that supposed to mean?” game. But I’m not, so instead I’m going to play the “what happens to the original, ‘pre-different’ type of associate?” game. Here I go:

What happens to the original, “pre-different” type of associate? If that person’s out of a job, then all else being equal might there be no net gain in employment? And if profits are still down, or stay down after hiring the “different type,” then what was gained on net by hiring the “different type”?

Anyway. Maybe it’ll work, maybe not. It makes perfect sense that if you want more productive workers, maybe you should up the bid for those workers by offering higher wages. Those workers can increase profits, but it’s also possible that the revenue gains won’t offset the higher labor costs.

Those’re just a couple of ramblings, I haven’t done much blogging in a while. Just been feeling kind of off, and I guess I’m not as– wait. Wait a minute. I just noticed some minimum wage stuff in this article. Hold on.

Forgive me for being presumptuous, forgive me for impugning your motives, maybe I’m wrong, but is this story supposed to boost support for a higher minimum wage? To chip away at my opposition to minimum wage laws and living wage laws? Is that why you sent it? “Pay people more; we’ll finally have cleaner Wal-Marts that actually have more than two lines open?”

Well, first, we already have cleaner Wal-Marts that actually have more than two lines open. They’re called Targets.

Second, as I’ve said before, minimum wage is a restriction on the worker as much as it is a restriction on the employer. Say we raise the minimum wage to whatever New, Improved Wal-Mart is paying. Remember the original workers? Not the new “different type,” I mean the original workers they had before their profits started dropping off? Some of them just got put out of work, or didn’t get hired, because they’re not the right type of different. And as I’ve said in past posts, you’ve made it harder for them to get hired, to gain experience, to make contacts, and so on.

Third, minimum wage isn’t just an economic issue. It’s a matter of rights, specifically the freedom to make contracts. This often invites a comeback along the lines of “yeah, the right to get exploited” or “yeah, the right to get paid less,” to which I respond “I’d prefer to be exploited for not-enough-money than not exploited for zero money.” And I prefer it because I’ve been there.

Let’s pretend for a moment that this’ll work out as hoped for Wal-Mart: higher revenues, more customer satisfaction, cleaner stores, shorter lines, higher profits. If paying higher wages works out for Wal-Mart, does that justify forcing other businesses to pay higher wages, too?

So, again, if it works out for Wal-Mart, great. Let others voluntarily follow their path. If it doesn’t, oh well. Hopefully others learn from it.

I need to get back to blogging more.

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