Discount Analysis

by Don Boudreaux on December 30, 2004

in Myths and Fallacies, Wal-Mart

Bill Steigerwald, at the Pittsburgh Tribune-Review, wrote this excellent essay on an attempted exposé of Wal-Mart. After reading Bill’s essay, I read the exposé, which is found in The Nation. The main claim in the exposé is that Wal-Mart hurts its workers by paying them too little.

The first question that comes to mind in the face of such a claim is this: if Wal-Mart’s wages, benefits, and work-conditions package hurts workers, why do people choose to work there? The answer to this question, I believe, is that Wal-Mart’s compensation package is better than the alternatives available to these workers.

I can imagine an argument that challenges this answer. But no such argument is found in The Nation’s attempted exposé. The closest the writer comes to offering one is to report the assertion of a politician that Wal-Mart out-competes “responsible” employers.

That’s possible, I suppose, under just the right set of circumstances. But this assertion is certainly not so manifestly true that it needs no support. But no support it gets. Therefore, with no reason to think otherwise, I’m pretty confident that Wal-Mart increases the well-being of its workers by offering them job opportunities better than whatever opportunities they would confront without Wal-Mart.

And because Wal-Mart indisputably keeps prices to consumers low, by far the most plausible conclusion is that Wal-Mart promotes the economic prosperity of the places it which it operates – it creates better jobs and increases the availability of goods and services. In short, Wal-Mart makes its workers and its customers (and, yes, its stockholders) wealthier.

But in the exposé in The Nation, Wal-Mart’s commitment to serving lower-income communities is treated as dastardly, sinister, almost Satanic. The author — Liza Featherstone — however, never explains why specializing in serving the needs of lower-income communities is suspect. Would lower-income people be better served if, instead of Wal-Mart, Nieman-Marcus and Tiffany’s open branches in rural and blue-collar regions of the country?

There are too many problems with this exposé of Wal-Mart to deal with here; I might return to some of these problems in later posts. I end here simply by registering my amusement with the author’s claim that Wal-Mart “threatens all American ideals that are at odds with profit – ideals such as justice, equality and fairness.”

Interesting claim.

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