Quote Of The Day

“The nonsense we hear from liberals about “living wages” at Walmart is just another example of liberals trying to babysit everybody with their dumb economic ideas. Ideas which can be tested very easily, by the way. If Walmart isn’t paying enough, they should have a hard time filling openings, but if people are willing to work at the wage Walmart offers, then Walmart is paying a fair wage, and that’s all there is to it”. —Greg Krehbiel

17 Responses to “Quote Of The Day”

  • Talk about “dumb ideas”!

    By Krehbiel’s reasoning, if Company X can find workers to take the jobs they offer, than Company X’s wages are therefore reasonable.

    That’s insane.

    Countless counter-examples are easily found – Sweat shops and child labor industries in Southeast Asia, for example – where there is no shortage of workers willing to be exploited, yet no reasonable person would ever describe these jobs as providing a decent “living wage”. Examples of jobs that offer indisputably poor wages, yet have no shortage of workers, are abundant. Visit the tomatoe fields in Florida some day!

    But counter-examples aside, the logic of Mr. Krehbiel’s argument is non-existent. There is simply no reason why the existence of a worker willing to do a job for a particular salary should be an indicator that the salary being offered is morally acceptable. There is no reason that the two should be connected, and they are not.

    I am generally a Libertarian, but this is an excellent example of a case where Libertarians have taken their philosophy too far.

  • LaurenceB, you REALLY need a refresher in what libertarianism means. The free market means you have a right to succeed if you can excel at your endeavor, and a right to fail if you’re pounding a square peg into a round hole. It is GOVERNMENT that will continue a failed program ad infinitum; private enterprise will fold and be recycled to its raw materials. Temporary pain for those affected, but someone else will grow and prosper.

    When an uneducated field laborer happens to toil within our borders, it is because he feels better compensated, and has better opportunities for his family, than in some other country.

    If government artificially raises his wages, his customer (his employer) may decide to mechanize the job, or close his doors when the product becomes uncompetitive in price; is the unemployed worker thus better off?

    It is THIS aspect–free enterprise–that has afforded Americans such a rapid improvement in our standard of living, and life expectancy, while so much of the world lags decades or centuries behind.

  • It’s an odd day when a “True_liberal” defends reasonable economic ideas! 🙂

    But I’m sure that’s what’s he means by the “true” part. A “true” liberal doesn’t fall for modern socialist claptrap.

    LaurenceB — a lot of people choose to work in “sweat shops” because it’s the only place they can get a job to feed their family. If you insist on imposing your “living wage” ideas on them, the company will simply close its doors and leave, and, congratulations, you will have destroyed a bunch of jobs. You won’t have helped anybody.

    Labor and wages are simply a commodity and a price paid for that commodity, and they should be treated as such.

  • LaurenceB,

    That is not insane if you follow supply and demand.

    Prices are not set at some absolute level of which they cannot fall below, they are set by supply and demand – by what is currently being offered, by what people will accept, and by what competition dictates. Trying to change this will lead to fewer jobs; a misallocation of labor and a situation where a few get paid alot more at the expensive of others.

    Your sweatshop example proves my point. Sure, those jobs may seem horrible to us, after all, we live in the most industrialized country in the world, but those jobs – even with the low pay and the bad working conditions – are a god sent to the people living in the area. Compared to the standards around them, sweatshop labor is in high demand and often has long lines of people wanting to work there. If the sweatshop pay and labor conditions wasn’t above what alternatives these people had, why would so many want to work there?

    Okay you say, sure HP, these jobs are better than the alternative, but couldn’t these companies pay more? I mean, instead of paying say $1/hour, why not pay $2/hour, maybe even $3 or $4 per hour, give more to these people. But remember, one of the few ‘competitive advantages’ these countries have is their low pay – you take this away and you leave them with nothing. Companies face enormous obstacles operating in underdeveloped countries. These countries tend to have weak laws, corrupt governments, weak property rights, high risk of confiscation, etc…all things that add to the cost of operating there. Then there is the obstacles of less productivity (workers in underdeveloped countries have less human capital – experience working with machinery and so forth), language barriers, time changes, overhead costs, etc. etc.. In other words, the higher you (artificially) raise wages, the less incentives there are for companies to operate in these underdeveloped countries and the more likely these companies are going to forego opening up shop there (if wages were equal, why would a company open up a plant in Thailand instead of just opening up another plant in the United States? – we have all of the positives without any of the negatives).

    In addition, artificially raising wages doesn’t just reduce the amount of available jobs (thereby reducing the #1 method of increasing job wages and working standards – c0mpetition), it also severely distorts the labor market. Most ‘sweatshops’ already have a high waiting time, a long list of applicants, so by artificially raising wages you have made the lines longer, the waiting time higher, and the desire to work there even stronger. Yet since labor is now more expensive you have forced companies (the ones that still find it profitable to operate) to hire less people, thereby compounding the problem. Also, who do you think is more likely to get the jobs now? Since price does not ration who works at these companies and who doesn’t, the most likely ration method will be bribery, political connections, and personal favors for managers and so forth. Thereby reducing the amount of money that goes to the very poor, reducing the amount of available jobs, and concentrating a high pay in the hands of the very few (who will tend to be more politically connected, able to provide larger bribes, and personal favors) instead of a higher than average pay for the many – all things that make the problem worse.

    If you don’t believe me take Paul Krugmans word for it, he wrote a very good article on this very thing, see here.

    I am generally a Libertarian, but this is an excellent example of a case where Libertarians have taken their philosophy too far.

    I am not the one arguing philosophy here – it is those against sweatshops that are. I have experience, a proven track record of improving the standard of living of the poor, and the human experience itself as an example that supply and demand works, it is those who question it that are performing wishful philosophy.

  • But wait, there’s more!

    While the “I’ll be generous with your money” likes to deny the link between minimum wage and unemployment rate, they’re perfectly willing to exploit that link when it suits their cause.

  • Hmmm…

    All of the responses above suffer from the same malady. They all assume that workers and employers exist in some theoretical vacuum where governments, poverty, natural disasters, etc. do not exist.

    That is not the real world.

    Generally speaking Adam Smith’s invisible hand works quite nicely, but to argue that it does under every set of circumstances is just wrong.

    A simple question: Do you consider the wage of a child labor sweat shop to be a “fair wage”? Please answer “Yes” or “No”. I think the answer to that question will illustrate my point quite nicely.

  • I think it is your view that sees the world in a vacuum, it is my view that takes the trade-offs of life seriously.

    For example, take this actual study on sweatshops:

    we admit that by Western standards, sweatshops have abhorrently low wages and poor working conditions. However, economists point out that alternatives to working in a sweatshop are often much worse: scavenging through trash, prostitution, crime, or even starvation….

    Our recent research – the first economic study to compare systematically sweatshop wages with average local wages – demonstrated this to be true.

    We examined the apparel industry in 10 Asian and Latin American countries often accused of having sweatshops and then we looked at 43 specific accusations of unfair wages in 11 countries in the same regions. Our findings may seem surprising. Not only were sweatshops superior to the dire alternatives economists usually mentioned, but they often provided a better-than-average standard of living for their workers.

    Our findings should not be interpreted to mean that sweatshop jobs in the third world are ideal by US standards. The point is, they are located in developing countries where these jobs are providing a higher wage than other work.

    Until poor nations’ economies develop, buying products made in sweatshops would do more to help third-world workers than San Francisco’s ordinance. By purchasing more products made in sweatshops, we create more demand for them and increase the number of factories in these poor economies. That gives the workers more employers to choose from, raises productivity and wages, and eventually improves working conditions. This is the same process of economic development the US went through, and it is ultimately the way third-world workers will raise their standard of living and quality of life.

    You look at the world in terms of ideal vs reality, economists tend to look at the world in terms of real trade-offs, knowing that ideal is not reality.

    An economist puts the different world views this way:

    Powell’s and Skarbek’s lesson is straightforward and important. But it’s a lesson too often ignored by “activists” who would rather pose and prance as moral crusaders than analyze situations in ways that might actually help people. The lesson is summarized by what I call “The Economist’s Question: “As compared to what?”

    In and of itself, situation A is neither good nor bad; it is good or bad only in comparison with it’s real alternatives. This lesson is a hard one, perhaps — it’s certainly an unromantic one — but it’s indispensable for sound analysis.

    More studies on sweatshops can be found here and here.

  • Was that a “Yes” HP? You feel that children in sweatshops are being paid a fair wage?

  • How do you define ‘fair’? Fair to our standards, no, fair to the standards of the country, yes. Fair is relative. All of this, of course, assumes that the child is atleast marginally better off than all of the other alternatives available.

  • The living wage for a single adult in Washington state is about $11.80 an hour. That is the wage in which somebody can get by without having to rely on the support of some government or private service. The living wage for a single parent is almost $30.00 an hour here. I don’t really know what the average Walmart employee makes but I’m willing to guess it’s around or slightly above minimum wage, which falls short of the two figures. It would seem that supporting a society of Walmart employees would be like supporting some crazy socialist system. 😉

  • Fair is relative. All of this, of course, assumes that the child is atleast marginally better off than all of the other alternatives available.

    So what about the child prostitutes in southeast asia? I’m guessing the reason their families push them into that line of work is that they live better off than whatever the alternative might be. What about the Africans who were brought during the slave trade? They were given a free trip to America, had a steady job, healthcare, room, board lined up… sounds like a nice fair deal. 🙂

  • Wal-Mart employees make an hourly wage of $10/hour, significantly higher than small businesses, which is one of the reasons why Wal-Mart campaigns hard to increase the minimum wage – it knows that the minimum wage will disproportionately harm small businesses and reduce overall competition.

    It’s not Wal-Mart’s that create ‘some crazy socialist system’, it’s crazy liberals that do that. 😉

    As far as prostitution goes, I am not making any moral judgement on any particular job, but only on relative terms to something else. In underdeveloped countries you basically have two options,

    A. Having employees work in low paying jobs, low standard of living jobs

    B. Having them work in even worse paying jobs and even higher risk jobs (often times B really just means prostitution, starvation, etc)

    While A may seem bad compared to the ideal, in underdeveloped countries we don’t have the ideal (if, on the other hand, you know a way we can have the ideal, I am all ears), so I would say that YES, A is a fair wage compared to B. But remember, my solution, my scenario, leaves the workers in the underdeveloped world atleast marginally better off, the alternative, leaves them with nothing, with B instead of A.

    So it is those against sweatshops who prefer prostitution and slavery, not those for sweatshops.

  • It’s not simply a matter of “fair wage” (fair by some bureaucrat’s standard) vs. some sub-fair wage. That is the alternate reality that activists in government, labor, or academe would frame for you. (Labor in particular has a hidden agenda–eliminating cheap competition!)

    In the real world, things are a lot less rosey, and the only standard of comparison is what’s AVAILABLE.

    Don’t let the ivory-tower looneys tell you what’s fair, and what isn’t.

  • It’s true that on average, Small Businesses pay lower than a Walmart job. However, consider that with small businesses there is always at least one proprietor that with relative success can do very well compared to a Walmart job. If a Walmart opens in a small town and forces all of the small family owned shops to close… sure, the people who worked in the shops can likely work at the Walmart for a few dollars more than they were making, but what about the business owners?

    I hate to rebeat a dead horse 😉 but it’s the same issue with the Mexico/NAFTA/ag thing. Sure, the maquilas pay more than what most traditional small agriculture jobs in Mexico, but the average farm owner (in most cases, these farms were family projects) would earn several times what a maquila job would pay (I think the number is about $1800/month). It’s skewed to only look at the issue from that one perspective.

    And as far as preferring sweatshops or prostitution for kids… I favor schools. 😉 Even a poor and politically isolated country like Cuba can still manage to send their kids to school and boasts a literacy rate that rivals any industrialized nation. I think corporations should be held accountable for taking advantage of lax laws and corrupt governments to get away with unethical actions.

  • Wal-Mart never eliminates all small businesses, many small businesses – specifically those that are compatible with Wal-Mart – thrive or are created, see here. So on net balance, Wal-Mart brings in more jobs and an upward push on wages.

    Even a poor and politically isolated country like Cuba can still manage to send their kids to school and boasts a literacy rate that rivals any industrialized nation.

    School is fine but it doesn’t go very far if there are no jobs. Cubans, for example, “are the only people in Latin America who have seen their intake of calories decrease. It is now better than in the 90s, but more than every tenth Cuban is chronically undernourished”.It has one of the highest infant mortalities, low standard of living, etc…

    Which brings me to my next point,

    I think corporations should be held accountable for taking advantage of lax laws and corrupt governments to get away with unethical actions.

    Remember msondo, lower pay and working conditions are the only real competitive advantages these countries have, if they didn’t have that, companies would not operate in these countries, their simply are too many negatives – corrupt governments, weak property laws, lawlessness, low human capital, costs associated with operating in a country with a different lanugage, different time zones, etc…So by doing the above you have basically doomed these countries to poverty. You have given them no avenue by which to escape poverty and raise their living standards.

    History gives examples of country after country – whether that be Hong Kong, Taiwan, South Korea or even Indian and China – rising out of poverty and raising their standard of living because of free trade, but there is not one instance of a country rising out of poverty without free trade, not one! Not the United States, not Britain, nowhere in Europe, nowhere in Asia, nowhere in Latin America, nowhere has a country rose out of poverty without free trade. So by doing the above, you have essentially cut the life blood of these countries and doomed them to poverty.

    Which is why I said above: it is those against sweatshops that are essentially for prostitution and slavery, not the other way around.

  • I think it was Sowell or Friedman who pointed out that if natural resources determined a nation’s wealth, then Hong Kong and Singapore would be dirt poor, and Sierra Leone filthy rich!

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