09 April, 2009

The Walmart Paradox

We are all familiar with the big store chain Walmart. But it brings up a deep, possibly philosophical question: is Walmart good or bad for the people of the US? At first we think "no duh", yes it's good. It's good because of its awesome prices. It's good because you can do everything in one place. Shop, eat, or whatever. But Walmart has a dark side to it, and this applies to more than just one store. Almost everything is made in china. To the uneducated rednecks of the world, this is bad because when something is made in China, it's not being made in America.
Getting deeper, this means Americans aren't making the money. China is. Now I like China, it's a very lovely place. But I like America better. Nevertheless, we need to acknowledge the fact that a lot of American jobs are going over seas. If you've seen Discovery's "The Peoples' Republic of Capitalism," then you know the problem. But what's the solution? We as Americans need to accept lower wages. We don't accept low wages.  That's why companies tend to move over seas. 
Now the companies play a major part in this too. Big executive douche-bags need to accept lower wages as well. Back to workers. Union workers are one of my pet peeves. They have easy jobs that easly make more than real jobs such as being a nurse, and in my case it's true. My dad is a hard working nurse in Colorado, who makes a good wage, although I don't know how much. Somewhere on our trip to Yellowstone, we came accross some construction, and my dad said that that union worker makes more than him, just by standing there, holding that sign. 
Let's go to factory workers. They're there working hard making their product, whatever it may be. Someone thinks they deserve a higher wage, and go to their boss, and demand a higher wage. The boss says no, and the disgruntled worker goes back to work, and gets everyone else riled up to a strike. They come the next day with signs saying that their boss is unfair. This why I don't like union workers; they want more and more. And that's not even it. They want to make sure no one else gets their jobs, so they also protest in the builidings, or a sitdown strike. In this case they deserve pay cuts, in my opinion. 
They just don't think: what if they end up losing their jobs to China, because if they just have to have $40 an hour and the company can't afford that.  If  the company ends up relocating to China or some other country, the workers end up losing their jobs, all because they weren't satified with a good wage. 
This brings us to what I like to call the Walmart Paradox, which can breifly state that when you shop at Walmart, you are selling your job. Here's how it works: first you are a good worker, living off of a good wage that you are satisfied with, and then the boss says you and the rest of the employees will be losing their jobs because the company wants to save money. You're out of a job, so to save money, you shop at Walmart, where you see almost everything saying "Made in China", including what you used to make. When you buy that stuff that's made in China, you are paying the people that made that, and if you're buying the product that you once made but that is now made in China, your basically selling your job.


Derek Payne said...

Huh. Oh, and don't forget that people are leaving because of the massive taxes!

Dave said...

I know this was posted a while ago, but I just came across this blog through Griffin's Facebook page, and it interests me.

This is an interesting post, but you've overlooked a number of important things.

One is the international division of labor. In an economy of any scale, the individual capable of doing a job most efficiently should be the one to do it. If goods can be produced more cheaply in China, that frees up American workers to do other things. This provides entrepreneurs with the resources they need to create new goods and services that will improve the quality of life for everyone.

Of course, there are factors that can distort the international division of labor. All other factors being equal, if country A has less regulation and lower taxes than country B, country A will be more attractive to businesses. Country B has several options to try to counter this, including raising tariffs on goods imported from country A, but this only increases prices for people living in country B and perhaps serves as an incentive for them to move to country A. The better option would be for them to also reduce regulation and taxes.

Regarding unions, in principle, there is nothing wrong with a group of workers voluntarily organizing and attempting to negotiate better compensation. In practice, unions have almost always used coercion in order to inflate their compensation beyond what the market can reasonably support. They use coercion in a couple of ways: 1) by strongarming non-union members into the union, and 2) by lobbying the government to introduce regulations that favor unions. An example of the latter can be seen in the GM and Chrysler bankruptcies, where UAW pension benefits were honored over the rights of bondholders, who legally had the first claim.

Unions are particularly problematic when it comes to government sector jobs. In a private business, if a union manages to negotiate wages beyond what the market can support, the company they work for will eventually go bankrupt. In public sector jobs, this never happens. Their compensation is paid out of taxes, and so there is no natural downward pressure on it. This is part of why total compensation for public sector workers is on average 47% higher than private sector workers.

Finally, as a consumer, you're faced with a lot of choices. If you're buying a specific product, and you have the choice between one that was made in America and one that was made in China, and price and all other factors are equal, then it probably makes sense to buy the one made in America. But if the one made in China is cheaper, you should buy it instead. Why? Several reasons. First, only a portion of what you pay actually goes to China. Some will go to pay the salaries of those Walmart employees, some will go to the companies who transported the product to the store, etc. Second, since you spent less money, now you have money left over to buy something else. So you've put the same amount of money into the economy, and you have more to show for it. Everyone wins. Third, if the American company can't effectively compete with the Chinese company, rather than prop it up in its failed efforts, you should let it go out of business so that it's employees and other resources can be used by more efficient entrepreneurs to produce other goods and services.