Michael Yates
----- Original Message -----
From: Max B. Sawicky
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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