Thursday, November 22, 2012

Robert Reich: "Why You Shouldn’t Shop at Walmart on Friday"

Robert Reich cites the weakening of labor unions as a major reason for the decline in the wages of today's workers, who are unable to collectively press for more compensation. He writes that while Walmart made $16 billion last year, its average employee earns $8.81 an hour and one third don't receive benefits since they work less than 28 hours per week. Reich considers the implications of Walmart workers planning a walkout on Black Friday. Since Walmart sets the standard for pay and working conditions among big box retailers, the consequences of labor organizing there could be considerable. Ultimately, the more workers earn, the more they're able to purchase, which also benefits retailers like Walmart. Reich makes a common-sense appeal for demand-side economics:

Consumer spending is 70 percent of economic activity, but consumers are also workers. And as income and wealth continue to concentrate at the top, and the median wage continues to drop – it’s now 8 percent lower than it was in 2000 – a growing portion of the American workforce lacks the purchasing power to get the economy back to speed. Without a vibrant and growing middle class, Walmart itself won’t have the customers it needs.

Most new jobs in America are in personal services like retail, with low pay and bad hours. According to the Bureau of Labor and Statistics, the average full-time retail worker earns between $18,000 and $21,000 per year.

But if retail workers got a raise, would consumers have to pay higher prices to make up for it? A new study by the think tank Demos reports that raising the salary of all full-time workers at large retailers to $25,000 per year would lift more than 700,000 people out of poverty, at a cost of only a 1 percent price increase for customers.

And, in the end, retailers would benefit. According to the study, the cost of the wage increases to major retailers would be $20.8 billion — about one percent of the sector’s $2.17 trillion in total annual sales. But the study also estimates the increased purchasing power of lower-wage workers as a result of the pay raises would generate $4 billion to $5 billion in additional retail sales.

This seems like a good deal all around.

1 comment:

Michael The Molar Maven said...

In actuality, and overall increase in salaries might not have to have a similar impact on consumer prices at all. If Keynesian economics works, as I suspect it does, then elevating families to levels above poverty will increse the number of consumers, eliminating the need to raise prices in order to maintain profits. Certainly, it's the moral thing to do anyway.

Having said that, being a small business owner, I know that having to provide benefits without employee input, would force me to close - and I mean close. The upredictability of future costs would be the main problem, as it became with workers in large corporations. I believe in paying my employees - the few that I have - a decent wage commensurate with the value of their work, and leave it to them to provide their own benefits. The one esception is the pension, because the law states that, in order to creat a plan for some (meaning me), qualifications must be set and all who meet those qualifications must be included. There are legal guidelines as to the limits of those quilifications. I'm not sure if employees can opt out in favor of increased wages as the law stands. In other words, I pay my staff enough for them to afford health coverage and more on their own and still not change their standards of living. One employee, who has retired, actually asked to trade vacation and sick time in favor of a higher hourly wage. I agreed to do this. Actually, in checking the records, she took all the vacation she wanted - without pay, of course, but she never once called in sick.

I believe that we created a major problem when employers began providing benefits rather than paying a decent wage. Organized labor proved to be far more visionary than their more selfish employers who were simply trying to defer costs to an unspecified future date.

I know that on the surface, this concept doesn't totally mesh with my liberal points of view, but all I am advocating is that employers pay a living wage high enough to allow their workers to provide for their needs comfortably and by themselves.

Next, let's start paying taxi cab drivers, waiters and waitresses and other people providing services a decent wage and completely eliminate "tipping".