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Gifts for all occasions in the Galleria! The "What is the Deal?" Deal-of-the-Week: Netflix DVD Rentals. NO LATE FEES; 40,000+ titles. Try for FREE! May 8, 2005 Benevolent Capitalism By Jan A. Larson Wal-Mart is arguably the most successful company in American business history. They are successful because they deliver a wide array of products at fair prices in a pleasant environment that attracts millions of shoppers every year. In short, Wal-Mart delivers value to their customers, more value than most competitors. Wal-Mart's success is, in no small measure, a result of being amazingly efficient in the way it acquires and delivers products. That efficiency includes managing costs at every step of the acquisition and delivery process, including labor costs. This efficiency is what Wal-Mart is touting when they advertise, "Always low prices. Always." Of course, as is always the case, you can't please everyone all the time. According to a New York Times article [1] there are some that think Wal-Mart is being stingy with their pay policies and are demanding that Wal-Mart increase employees' wages. Wal-Mart frozen food stocker, Jason Mrkwa, identified in the article as a high school graduate, laments that he is underpaid, and complained, "I don't see why Wal-Mart can't pay more" and Andrew Grossman, executive director of "Wal-Mart Watch," a coalition critical of Wal-Mart, claims that Wal-Mart, "... has the ability to pay higher wages." Socialists and entitlement seekers, while benefiting greatly from the American capitalist system, do not and likely never will understand why they are not offered compensation in excess of the value they provide to their employer. Labor, like raw material, is simply a commodity in a capitalist society. When a commodity is for sale, the buyer pays the lowest price required to meet his/her needs. No one pays $10 for a gallon of gas just because they might be able to afford it although I'm sure the operator of the gas station could use the money. Mr. Mrkwa, 27, is earning $8.53 per hour, a figure that Wal-Mart offered him for his labor and a figure that he obviously accepts. The first question that comes to my mind is why Mr. Mrkwa, after at least 8 or 9 years since high school, is still working as a stock boy, but I digress. No company pays major league baseball player-like salaries to people without unique skills that justify those salaries. Instead of complaining, Mr. Mrkwa has three options: Work hard and demonstrate that is labor output is worth more than his current wage, quit working for Wal-Mart and find a better paying stock boy job, or develop skills that are more highly prized in the marketplace than his current skills as a stock boy. Similarly, LaTasha Barker, a single mother, who formerly worked as a cashier at Wal-Mart-owned Sam's Club cried, "They don't pay a living wage." Barker, to her credit and unlike Mrkwa, quit her Sam's job to take a higher-paying position elsewhere. The last time I checked, Sam's was still in business, so I must assume that Barker was not the key employee in the corporation. Grossman apparently doesn't grasp that while Wal-Mart doesn't pay its employees like George Steinbrenner, the fact that they don't overpay for labor just like they don't overpay suppliers for their products, helps make all of their products affordable for everyone, even those that struggle to make ends meet. While an extra $2 per hour might be a boon to Wal-Mart employees, it would have a negative effect on every one of Wal-Mart's customers, including those employees that shop at Wal-Mart. It would also cost jobs, as Wal-Mart's sales would necessarily decline in response to rising prices. That's just the way the immutable laws of economics work in a capitalist society. The numbers bear out the fact that Wal-Mart does not have trouble filling their job openings, despite their "penny pinching." As H. Lee Scott, Wal-Mart's CEO noted, if Wal-Mart was as greedy as critics claimed, they would not have had ten or more applicants for every available job at recent store openings in Los Angeles and Arizona. Some Wal-Mart critics, including William McDonough of the United Food and Commercial Workers union, suggest that Wal-Mart treat its employees more like the employees of General Motors and Ford. Ironically, on the day following the publication of the Times article, USA Today ran a story describing how Ford and General Motors continue to lose market share to more efficient foreign automakers. Does anyone doubt that Ford and GM's overpaid unionized workforce has something to do with that? Despite the calls of the critics, benevolence is not an obligation of any company in a capitalistic society. Employees, like customers, vote with their feet. Wal-Mart became the largest company in America, not by the luck of the draw, but by offering value to its customers and to its employees. They have no obligation to change the way they do business and, in fact, it would be disservice to shareholders, customers and employees if they did. -- Send feedback to the author. The "What is the Deal?" column will appears weekly on the Pie of Knowledge website. Guest submissions are welcome and encouraged. To submit an article to "What is the Deal?" click here. To subscribe to the "What is the Deal?" mailing list and receive early notification when a new column is available, click here. The Pie of Knowledge will never, ever divulge email addresses to any third party for any reason unless so ordered by a court of law. Contributions to the Pie of Knowledge are greatly appreciated. 
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