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Progressive Wal-Mart

Posted By Russ Roberts On November 28, 2005 @ 11:50 am In Wal-Mart,Work | Comments Disabled

In a quest for truth, the Washington Post’s Sebastian Mallaby becomes persona non grata at chic Washington Dinner parties by making the case [1] (rr)  that Wal-Mart is actually good for poor people:

Wal-Mart’s critics allege that the retailer is bad for poor Americans.
This claim is backward: As Jason Furman of New York University puts it,
Wal-Mart is "a progressive success story." Furman advised John
"Benedict Arnold" Kerry in the 2004 campaign and has never received any
payment from Wal-Mart; he is no corporate apologist. But he points out
that Wal-Mart’s discounting on food alone boosts the welfare of
American shoppers by at least $50 billion a year. The savings are
possibly five times that much if you count all of Wal-Mart’s products.

These gains are especially important to poor and moderate-income
families. The average Wal-Mart customer earns $35,000 a year, compared
with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart’s
"every day low prices" make the biggest difference to the poor, since
they spend a higher proportion of income on food and other basics. As a
force for poverty relief, Wal-Mart’s $200 billion-plus assistance to
consumers may rival many federal programs. Those programs are better
targeted at the needy, but they are dramatically smaller. Food stamps
were worth $33 billion in 2005, and the earned-income tax credit was
worth $40 billion.

Mallaby also gives a lovely answer to those who complain that Wal-Mart encourages its employees to apply for government health care programs.  First, he explains that this is what you’d expect of a business [2]:

There’s a comic side to the anti-Wal-Mart campaign brewing in Maryland
and across the country. Only by summoning up the most naive view of
corporate behavior can the critics be shocked — shocked! — by the
giant retailer’s machinations. Wal-Mart is plotting to contain health
costs! But isn’t that what every company does in the face of medical
inflation? Wal-Mart has a war room to defend its image! Well, yeah,
it’s up against a hostile campaign featuring billboards, newspaper ads
and a critical documentary movie. Wal-Mart aims to enrich shareholders
and put rivals out of business! Hello? What business doesn’t do that?

But then, having teed up the ball, Mallaby proceeds to drive it out of sight:

Wal-Mart’s critics also paint the company as a parasite on taxpayers,
because 5 percent of its workers are on Medicaid. Actually that’s a
typical level for large retail firms, and the national average for all
firms is 4 percent. Moreover, it’s ironic that Wal-Mart’s enemies, who
are mainly progressives, should even raise this issue. In the 1990s
progressives argued loudly for the reform that allowed poor Americans
to keep Medicaid benefits even if they had a job. Now that this policy
is helping workers at Wal-Mart, progressives shouldn’t blame the
company. Besides, many progressives favor a national health system. In
other words, they attack Wal-Mart for having 5 percent of its workers
receive health care courtesy of taxpayers when the policy that they
support would increase that share to 100 percent.

Brilliant.  I will try and track down the source for his claims about the percentage of workers on Medicaid.

Here [3] is an earlier post on whether Wal-Mart should treat its workers better.

Here’s [4] another on Wal-Mart wages.

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URLs in this post:

[1] making the case: http://www.washingtonpost.com/wp-dyn/content/article/2005/11/27/AR2005112700687.html

[2] you’d expect of a business: http://cafehayek.com/2005/08/expanding_broad.html

[3] Here: http://cafehayek.com/2005/05/can_walmart_pay.html

[4] Here’s: http://cafehayek.com/2005/07/why_walmay_pays.html

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