Thinking about big boxes on Labor Day

This morning I awoke to an NPR interview with one of the editors of The Wall Street Journal. Appropriately enough for Labor Day, the topic was labor, although the WSJ editorial board is hardly a friend to the working man.

The interviewer asked about the minimum wage, and about how Wal-Mart in particular has been criticized for poor compensation and treatment of their workers. The WSJ editor made the typical supply-side argument that Wal-Mart needs to keep its costs down to compete, and if higher costs are passed on to the consumer, then it just hurts the people who shop there, and many of them are low wage earners themselves. Here's what I think of that: baloney.

You see, the WSJ editor was implying, and he was hoping we would assume, that big box retail is labor intensive. It is not. In my previous article on this subject, I examined Target's finances. (I assume that Wal-Mart's cost structure is similar to Target's.) The key figures are public knowledge, available on the Internet for anyone to see. And it looks to me like the wages of its lowest paid workers (making less than $10/hr) couldn't possibly account for more than 5% of its total costs. Target complains that being required to pay $10/hr plus benefits would cost them an additional 50% for some employees, and they would then need to pass the cost on to the consumer. But we're talking about a 50% increase in only 5% of its costs. To cover the increase in wages, all they would need to do is sell that $39 pair of shoes for $40 instead.

Three weeks ago, I went to a WakeUpWalMart event at St. Gregory's High School in my neighborhood. You can read about it at WakeUpWalMart's blog. I didn't know much about the organization before I went, but I was pleased to hear them make the same point that Wal-Mart really can afford to pay its workers more.

Finally, I was at a meeting at Alderman Smith's office (48th Ward) last week where she explained her position on the living wage ordinance. Among other things, she sees this as a taxpayer issue. When a large employer does not pay a living wage, the City must then provide services to help the workers make ends meet. The cost of these services is borne by the taxpayer, and the fact that the employer does not bear the cost amounts to corporate welfare. Alderman Smith says that letters to her office have been overwhelmingly in favor of the ordinance.