[lbo-talk] Hidden subsidies to Wal-Mart

MICHAEL YATES mikedjyates at msn.com
Mon Mar 8 21:57:01 PST 2004


Max is right that WalMart will do what it is doing just as long as it is powerful enough to do it. If it were possible to imagine that there could be universal health insurance without any increase in the power of workers, then WalMart will still pay low wages and continue to be a corporate scofflaw. I might mention that there are unionized workers in the U.S. who qualify for food stamps.

Michael Yates

----- Original Message -----

From: Max B. Sawicky

To: lbo-talk at lbo-talk.org

Sent: Monday, March 08, 2004 9:23 PM

Subject: RE: [lbo-talk] Hidden subsidies to Wal-Mart

This discussion depends on assumptions on the following

that nobody has indicated, one way or the other:

is the labor market competitive for the sector in question

do employers hire based on the value of the marginal hour or marginal worker

do workers supply labor based on the returns to the marginal hour or

otherwise

what are the elasticities of supply and demand

You may think that econ theory is b.s., but the fact is

that a coherent answer to the question of who is subsidizing

who depends on the implicit answers to the above.

No theory is worse than mainstream theory.

For instance, suppose two firms

selling the same product are located next door to

each other, with equal costs of labor, one providing

health insurance, the other not. It does not follow

that the no-fringe firm must have an advantage over

the other. The opposite could be the case. The

workers' with the untaxed fringe benefit have greater

after-tax income if they value a dollar spent on their

health insurance the same as cash, and this could induce

more work effort for the same cost to the boss.

You might say that's the wrong comparison. The right

one is two firms paying the same money wage, with

one providing a fringe in addition. But why would

that happen. Is there a different species of boss

in each firm? Why did the older firm provide the

fringe? Because its owners were less interested in

making money? Bosses used to be less rapacious, in

the good old days?

Alternatively, if there is a range of feasible wages for

the employer and employee, with the balance of power

determining who gets what, then public benefits are

just gravy for those fortunate enough to get them.

Another factor is that Medicaid is not work-conditioned.

You don't have to work to get it, hence the employer

has no leverage from it. If your work is worth X to the

employer, you can hold out for X or find somebody else

who will pay X. The only way you could not get X is if

employers conspired to pay you no more than X minus your

cost for an equivalent to Medicaid.

Other stories are possible too. I don't know which one is right.

I do know that empirical research shows work-conditioned

benefits like the EITC raise worker income. If they don't,

then as somebody said there is no value to them for the

worker. By the same token, some economists think a

minimum wage increase just gets washed away in price

increases, so why bother.

I think it's possible to mistake the dog's tail from

its teeth. Walmart chooses cheap labor standards and

an anti-union environment. Absent sufficient labor

resistance, it will keep things that way. I doubt

that public benefits or the relative beneficence of

other firms makes any difference.

Walmart is not competing with walmart-sub-two. Walmart

is replacing an mixed array of different business firms

because people will buy their shit, communities will

tolerate their introduction, and the gov tolerates their

abuse of labor law. I think comparisons of

Walmart with Ralph's and such are apples-to-oranges.

Methinks if health had already been completely socialized,

or if nobody provided health insurance,

Walmart would still be steamrolling its way forward on the

backs of other firms.

People seem to be looking for a gadget fix, when the

only solution is political power.

mbs

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