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Thursday, December 10, 2009

Wal-Mart Labor Practices Discussion

Here is a reply by my friend, to my last blog, "Why Do I Find Myself Sticking Up for Wal-Mart." Below the reply, is my answer.

I read the answer to my question, here's is another question for you...why do you keep insisting that fair labor practices are "charity" or that someone who believes they are important is more concerned with charity than"profit motive"?? How did you come to this conclusion because to me that makes absolutely no sense. Your answer seems to agree with my views and disagree with them at the same time??

Maybe if Walmart did better by it's employees, the employees wouldn't need "charity".

87,500 people is alot of people to wrong. ... See More

To make it abundantly clear, I don't even believe in charity in the traditional sense of the word. No one should get a hand out except for children who can not work or provide for themselves. Charities I support create opportunities for people to work or get an education so that they can support themselves.

My Reply:

Originally, In this discussion, going way back, we were discussing the profit motive, and I said that Wal-Mart has done more for poor people than any charitable institution--through low prices and jobs. This was an example of a larger principle; that pursuing profit is looked down upon, even though it ultimately benefits the poor more than charitable work.

You took exception to that, given their labor practices.

I argue that their labor practices are better sorted out by the market, and the free choice of the employees and customers than the government--because government intervention undermines free choice and produces worse outcomes by any measure. Usually, such government activity is just rent seeking. I said that, although Wal-Mart has done bad things, you shouldn't be so quick to judge what is good for a poor person. They can decide for themselves where they choose to work and what labor practices they are willing to tolerate.

Wal-Mart, like any other business, has to compete in the labor market. Their wages, benefits and conditions are determined by what the market will yield. Some people dont think that is enough. So the government often imposes higher standards--purportedly, imposing a higher cost of labor, for the benefit of the laborers.

This forces their customers to pay for such charity--which most can ill afford to do. What really happens, is they stop buying altogether, due to higher costs. This increases real unemployment. After the minimum wage was imposed in the US, unemployment among the poor skyrocketed--and many jobs were eliminated due to higher costs.

So your ultimate result is this: poor people can afford less goods, and they have less jobs (albeit, many jobs you dont think they should have a right to, because they dont pay up to your standards).

Here is a great discussion on this by Milton Friedman.

Here is an REALLY good discussion by Peter Schiff.

If such low-paying jobs are so bad, then why would 20 million Mexican travel 2000 dangerous miles for a job that pays below government standards? If such standards were imposed, the jobs would dry up and the the immigrants would not even get the low wages at all.

If we were to drive China's labor costs to US levels, there would be no incentive to do business there. Low cost labor is their only comparative advantage, and they will benefit greatly from it in the long term. Although, in the short term, there will be difficulty. This is the same thing that happened in the US and Europe in the industrial revolution.

I know Wal-Mart could do more, and shame on them for not. But if we are going to draw battle lines, put me on Wal-Mart's side any day--with their millions of employees, shareholders, and customers. Wal-Mart thrives because consumers chose to shop there, and people chose to work there. They never got any favors from the government.

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