Wal-Mart and the Economy

Wal-Mart has seemingly become the latest focus of opposition for many activist groups on the left. Many of these groups cite that Wal-Mart pays low wages and neglects its employees by providing inadequate benefits that leave many people uninsured and searching for coverage. However, these groups neglect the scope of employment at Wal-Mart, as well as Wal-Mart’s ability to take advantage of economies of scale to provide essential goods at extremely low prices.

Wal-Mart dramatically lowers prices because they can take advantage of the aforementioned economies of scale, which posits that transaction costs can be lowered by dispersing the cost of a product over multiple transactions, therefore bringing the unit per transaction down significantly. Wal-Mart does this by purchasing staggering amounts of products from its suppliers, and passing on the savings by increasing the number of transactions through the medium of lower prices.

Moreover, because Wal-Mart’s prices are so low, and everyone has the ability to purchase from the mega-retailer, everyone benefits from what is called the real income effect. Wal-Mart’s low prices essentially act as a \'d4raise’ for everybody, but instead of being paid more per hour, Wal-Mart lowers prices to make one’s dollar go further than before.

Because of their ability to make common goods much more affordable to lower income workers and families, Wal-Mart is much more of an asset to the disadvantaged rather than a nuisance. Furthermore, the misconception of Wal-Mart as a firm which keeps people poor due to their low wages neglects the type of work Wal-Mart offers, and the degree of skill the job requires.

The fact of the matter is that Wal-Mart is and always will be a low-skill, low-wage employer simply because the nature of the job demands it. It is not a profession that requires copious amount of ingenuity, strenuous work or demanding intellectual rigor. This is not to demean workers at Wal-Mart — especially since this writer was once employed there — but it is simply being pragmatic about the type of skill involved in executing a job at that establishment successfully. Since the nature of the work is routine, and the productivity of the workers is at a level which compensation seems about right for their amount of output, Wal-Mart is within their right to pay a wage which, despite all the criticisms, still attracts many applicants nationwide.

Wal-Mart is a firm which does not exactly provide great career opportunities within its business, but rather acts as a place where low-skilled workers can cultivate a good foundation of human capital to be used in professions which provide greater upward economic mobility. This is evidenced by the fact that Wal-Mart has an extremely high turnover rate, meaning that employees within Wal-Mart stay with the firm for very short periods of time.

They often see Wal-Mart as a temporary place of employment which can be used as a stepping stone for better professions, and are not simply locked into a career that provides menial wages as many opponents of the firm suggest.

The Wal-Mart opposition is superfluous, and criticisms of the retailing giant are in dire need being put in proper perspective.