Is Wal-Mart Good for the American Working Class?

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E-mail debates of newsworthy topics.
June 30 2006 2:25 PM

Is Wal-Mart Good for the American Working Class?

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Barbara,

You probably thought you had heard the last of me. But I've been mulling over our dialogue for the last two days and wanted to take a final shot at summing up. Wal-Mart jobs, like all other jobs in the retail sector, are pretty lousy. They're better than the bodegas they replace because they come with higher wages, health benefits, more job security, and greater prospects for promotion. And they support better living standards than retail jobs did 30 years ago, including far better health care and more material trinkets as well. But they're not great jobs.

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The government already does some things to make these jobs better, with the EITC, Medicaid, and other programs—disproportionately supported by taxes on folks like Lee Scott. I want to raise Lee Scott's taxes still further and expand those programs. And you're right, my approach hasn't had great success in the last six years: The rich have gotten huge tax cuts and the Republicans have attempted, although largely but not entirely without success, to cut these essential programs. (In fact, the EITC and refundable tax credits for families have been expanded in the last five years, thanks to pressure from more progressive members of Congress who forced these expansions on an uninterested President Bush.)

So, what to do now that my solutions are being blocked? One thing we'll hopefully be able to accomplish in the next year is raise the minimum wage to $7.25 per hour—this will give a pay raise to folks at the bottom with, the evidence suggests, little adverse effect on employment. But this won't do much for Wal-Mart workers: Most of them make more than this.

So, you want to go further to pressure Wal-Mart to raise wages and benefits, to make it a better company? If that's all it was about, count me in. But the principal methods are preventing the spread of Wal-Mart's benefits to new communities (like my hometown, New York City), living wages at $15 an hour, retail-specific minimum wage rules like Chicago's and Maryland's pay-for-play that target a single company that already provides decent health benefits.

The collateral damage from these efforts to get Wal-Mart to raise its wages and benefits is way too enormous and damaging to working people and the economy more broadly for me to sit by idly and sing "Kum-Ba-Ya" in the interests of progressive harmony. Not to mention the collateral damage to rational thought from many of the arguments made by the anti-Wal-Mart community, including the arguments I noted in my last post that undermine food stamps and the progressive taxation.

Part of you wants to believe that your solutions would benefit everyone. In your last post, you suggested that if Wal-Mart raised its wages, it would get more customers. I don't have any great business advice for Lee Scott, but he's probably already figured out that if he pays his workers another $1,000, they'll spend at most $250 of it at Wal-Mart—of which only $10 will be profit for Wal-Mart. Hardly a way to grow your business.

Part of you is willing to accept that the solutions are zero or negative sum ("class war," as you put it). If I thought the question was a trade-off between efficiency and equity, it would be worth thinking about. But, as I've discussed extensively over the past week, I don't believe this is the right analysis. Much of the costs of, say, a living wage would be passed on to Wal-Mart's shoppers, a group that isn't much better off than its employees. Fewer people would be able to get jobs. And we would threaten the dynamic and competitive economy that has generated such enormous productivity gains—and low prices—over the last decades. (Part of the reason your solutions won't work is that corporations aren't nearly as powerful as you seem to think. Wal-Mart, for example, is facing intense competition from Target, Costco, and other companies and is, as you noted, having a tougher time lately—competition that leads to lower prices for consumers and higher wages for workers.)

So, we're both frustrated. I'm trying to protect both progressive programs and the productivity growth and low prices generated by companies like Wal-Mart—while hoping for even better progressive programs when the political climate is more favorable. I respect the fact that you're trying to make a difference today. I just wish I wasn't so convinced that the difference would be very much for the worse.

And this, I promise, is my last post.

Best,
Jason

Jason Furman is a senior fellow and director of the Hamilton Project at the Brookings Institution.

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