fatvegan

In my study-induced meanderings I found a nice post on Walmart, much of which I disagree with.

I agree that the return on equity is the real figure to be looking at. That's the "profits to capitalists" that the left complain about and 22% is mighty high. There's nothing wrong with a high ROE, but when Walmart complains that it can't pay wages that are any higher or prices would go up, that's not strictly speaking true. I suspect that the issue is that if they paid their staff more than minimum wage there'd be the opportunity for other businesses to come in and undercut them on price. I think this is supported by Walmart execs recently suggesting that the minimum wage be increased. The point is that even if a worker is worth a lot more than their current wage, the stock market will punish you if you don't extract as much as you can from them.

In poor countries I agree that Nike factory jobs are often the best option available. However, in many cases options have been previously removed from farmers by taking their land by force. Whether it's economic or physical force, they end up effectively have only one choice, and that is to work in a factory. I realise that this process usually has very little to do with the foreign companies that benefit from their labour, although not always, but I think it's misleading to suggest that a Nike factory is the best option of many.

The issue of wages vs prices is a valid point, but I suspect that the overall effect is a transfer of wealth from the poorest to the middle class. It's true that the poorest Walmart workers get cheaper food, but so do the middle class workers who haven't had their wages cut. Even if output is increased, "making the pie bigger" and all that jazz, I would argue that the workers on minimum wage need the income more than America needs the cheaper food.

One interesting outcome is that I reckon America's low minimum wage makes the economy look very good. It forces workers to work far more, even while their productivity is increasing. If you doubled minimum wage to something like the Australian minimum, output would probably drop significantly as people went from 60 hour weeks to 40 hour weeks.