Nelson Lichtenstein

I saw Mr. Lichtenstein the other night at the Ath. Liechtenstein wrote a book on Walmart slamming the company for their labor policies, low wages and more. For someone who spent so long around the company that's perhaps taken more advantage of global economics than any other, I was a little surprised to see that he himself did not have a firm grasp on economics. Yes, Walmart pays it workers low wages, and yes, they have probably done some things in the past that they shouldn't be too proud of. But if they paid their workers more, they'd either employ fewer workers or they would have higher prices. When we look at a company like McDonalds, it's very clear that the workers there are going to be paid really horrible salaries, because the whole point of fast food is to deliver cheap, good food. That's why people go there. And while the wages are low, and my dad used to point to the McDonalds workers as examples of jobs I could get if I didn't work hard in school, not very many people think that this is a gross injustice. If McDonalds paid more for workers, Big Macs would cost more, or people would have to wait longer for their food because they would be hiring less workers. Either of these things would shift more business to Burger King or In n Out. Well Walmart is like a retail McDonalds. The reason they have such good sales is because they have the lowest prices in the business. They focus relentlessly on cutting costs and passing most of those savings to the consumer. I got used to Target's prices, and then I went to Walmart the other day and their prices are way lower than Target's. Holy cow. My guess is that you can't have absurdly low prices and pay the workers a 'decent' amount. On the flipside, low prices leave all Americans better off, including Walmart workers and especially poor people, who have to spend less of their income on consumer goods because everything's so damn cheap. Furthermore, Walmart's success has enabled it to flourish and employ over 1 million employees in the United States. The pay might be crappy for those workers but it's better than no job. Also if a Walmart employee doesn't like their job they are free to leave, and many do. Sure they may occasionally work overtime for no pay, but if there was a better opportunity for them in the market, besides unemployment, they would take it. Low wages aren't extortion, they're a sign of the market clearing price for a job that isn't too difficult. Is there an equilibrium where Walmart pays a smaller number of workers higher wages, with less turnover, like at Costco? Maybe. My guess is that Walmart would move there if it could, and keep the same low prices and level of service.

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One thought on “Nelson Lichtenstein

  1. Nick Summers

    This is true if Walmart is not making any profits. In a perfectly competitive market Walmart would be a price taker. In an oligopoly, Walmart is the big competitor so it gets to set the lower prices that other firms must choose to compete with. In the end Walmart makes monopolistic profits. Could they raise wages and keep low prices? Yes. Pass on the profits to the workers. Are they doing this? No. Also many towns Walmart exists in they are a Monopsony. They price out the small competitors and become the sole job providers. This gives them the ability to only offer low wages.

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