…if employers reducing costs by cutting labor costs ala Walmart is laudable, does that make Costco the world’s greatest monster?
Nob Akimoto
Nob Akimoto is a policy analyst and part-time dungeon master. When not talking endlessly about matters of public policy, he is a dungeon master on the NWN World of Avlis
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Not to me but I’ve long established my liberal bona-fides.
I get that reducing costs does lead to more prosperity but I don’t think this requires putting wages in the red. People need to buy your product.Report
No.
This is because what some libertarians tend to gloss over, or don’t bother elaborating on, is that labor cost is a more complicated beast that contains more than merely the wages a company pays its employees:
-Wages are a component of labor cost, often one of the largest ones along with employment benefits;
-The cost of hiring and firing employees is a component of labor costs;
-The costs of training, certifying and generally bringing the efficiency and skill level of an employee up to a level where they’re worth what they’re being paid is a significant labor cost.
Turnover, the process of losing current employees and replacing them with new hires, directly inflates the second and third components of labor costs. In that low wage/low benefit jobs are the lowest common denominator in the labor market employees with any modicum of capability or drive quickly move out of those positions in favor of other (any other) jobs that they can find which causes these jobs to suffer enormous turnover. By increasing their wages and benefits Costco decreases turnover which diminishes their net labor cost.
So, both Walmart and Costco are seeking to decrease labor costs; Walmart via lowest common denominator crap pay and Costco via trying to diminish turnover and the negative financial and skill costs that come with it. Costco, as a bonus, also increases the efficiency, skill level, motivation and moral or their workforce and garner a significant public relations boost both of which ultimately impact their bottom line.*
*Though it bears noting that Costco gleans this benefit only as long as they continue to be one of the few companies that pay over market prices.Report
A lot of my friends have been very excited that CostCo announced they will be closed on Thanksgiving because workers deserve the day with their families.
So clearly there is a market for people who want to shop at companies that treat their employees well.Report
Personally I’d think that libertarianism is far more vulnerable to scorn at the upper end of the pay scale than the lower end. The spectacle of the incestuous circle jerk of incompetent executives voting each other lavish salaries and benefits even as they drive their companies into walls is revolting, ravages shareholder value and is AFAIK unrelated to any government regulation.Report
I’ll never understand why anyone would want to go shopping on Thanksgiving. Of course, I hardly ever went shopping on Black Friday either and I avoided malls after October. 🙂Report
It’s not about the want. It’s about the “We forgot to buy mayo!” and the “We’re out of soft drinks!”Report
The spectacle of the incestuous circle jerk of incompetent executives voting each other lavish salaries and benefits even as they drive their companies into walls is revolting, ravages shareholder value and is AFAIK unrelated to any government regulation.
I’m still waiting for smart companies to out-source their Board. As I’ve noted many times, I’m pretty sure there are plenty of people abroad willing to make bad, short-sighted decisions for a fraction of what an American CEO makes. 🙂Report
@damon
Will’s right. It is largely about those things you forget and need for cooking the meal. Also our family does everything but bake so we would go to a localish bakery in the morning to pick up the bread and pies. I have fond memories of those rides.
What I don’t understand is the people in news reports who line up to be the first people in on Black Friday. There are probably some class issues here that I feel guilty about.Report
@north
I wonder if some elements of the tax code or corporate law make such situations possible, or could make them more likely along some margin. I’m thinking of law or case law that might limit shareholders’ ability to sue corporate executives for poor management, or tax codes that do too little to curb short-term gains (and therefore favor those types of gains over gains from longer-term investments and time horizons).
I’m speculating here, as I’m not an expert and I imagine these things aren’t clear cut and corporate misgovernance would probably happen regardless.
@newdealer
I don’t see the appeal of Black Friday shopping or really of mall-shopping in general, even though I do the latter sometimes. I used to work in a mall food court and Christmastime was horrible in so many ways. (It wasn’t all bad because we got more hours, the time went by more quickly because we were busy, and there was a certain gallows humor style comaraderie. Others’ mileage probably varied, however.)Report
Or maybe there’s a perfectly rational business explanation for it, along the lines of:
Managing a large corporation is dicey business, and even the best executives have only limited influence over the success of their corporations. However, the expected distribution of profits under a great executive is better under a good executive than under a mediocre executive, and better still under a great executive. When dealing with hundreds of billions of dollars in revenues, a rightward shift of even a few percent in the expected distribution of profits can be worth huge sums of money, justifying the executive’s decisions.
I don’t know whether that’s the answer, but it seems like a plausible model.
I’m fairly certain I’ve read that, controlling for size, CEOs of privately-held firms are paid more than CEOs of publicly traded corporations, which casts doubt on the rogue board of directors theory of executive pay. I’ll see if I can find it.Report
Well sure, I understand about groceries. I’m talking about all the other stuff–all the other retail stuff.
Most of the grocery stores I know about are open only part of the day. The Best Buys, and Walmarts with their early openings on Black Friday or opening on Thanksgiving day evening, etc. just stun me. Don’t understand this desire to shop…Report
Semi-related. Someone I went to law school with could bet the next Robespierre according to this chart and article. Or maybe a Danton. Perhaps an unemployed journalist will become an American Marat:
http://www.bloomberg.com/news/2013-11-20/blame-rich-overeducated-elites-as-our-society-frays.htmlReport
Hard to take anyone seriously when he refers to Roosevelt’s idiotic policies as “judicious reforms.”Report
Costco itself argues that their human resource policies help their bottom line. If true, that would give them a pass. (I should say that while higher wages benefit Costco, that doesn’t necessarily mean that Walmart would benefit from doing the same. They might, or they might not.)Report
I’d submit, Will, that Costco’s primary benefits come from being at the head of the pack. If WalMart were to try and follow suite they’re so big that they’d move the industry standard. This would not only not glean them much benefit in terms of PR or employee motivation but would also expose them to being undercut in costs by a competitor.Report
That’s exactly the linesalong which I was thinking.Report
That said, I haven’t read the paper that Chris linked to.Report
Will, that link basically details the portion of Walmart’s profits that go into the Walton’s buying back Walmart stock. If that money were used to increase wages for all of Walmart’s full-time (32 hours+) employees, they could pay them all at least $25k.Report
Sure, I guess, and if everyone in the US donated just $100/year, the same effect could be achieved. Why should the shareholders of Walmart, specifically, be the ones to do it?Report
That is, the critics of Walmart and other low-wage employers seem to have this bizarre notion that these employers have some special obligation to give charity to their employees. I don’t know where this comes from.Report
Brandon,
well, son, if you’d met Sam Walmart, you’d understand.Report
Nob,
Is there a link that’s supposed to go with this? Or am I just wholly ignorant on something that everyone else seems to know about?Report
Costco pays its employees very well. Given that, and given that Walmart is being congratulated by people here for paying its employees less because it allows them to reduce costs, does it make Costco bad for paying their employees so much (when it could be paying them less and passing the savings onto the consumer)?
I think that’s what Nob is getting at.Report
I wrote my email about what working at Wal-mart is like and sent it to Mr. Kazzy, Mr. Truman. One of the things I mentioned is that Wal-mart’s training week does not include any training at all on how to work in your assigned department. All of that is supposed to happen from the other people in your department but most of them will have just been assigned there as well so you basically have a group of people none of who know almost anything about the department trying to figure it out and train each other. I wish there had been a Costco in the area for me to apply for when I was looking for work.Report
given that Walmart is being congratulated by people here for paying its employees less
I don’t think that’s really accurate.Report
Not as long as they’re throwing money away on fire exits.Report
Roger specifically said:
And a whole host of sub-points based on that argument. This isn’t a strawman, the whole thread had him talking about how great employers are.
With the likes of statements like:
Report
“Among many things”
The other things I mentioned were the cost of capital and other resources.
Let me clarify, COSTCO’s strategy is not to OVERPAY for their employees. Their strategy is to attract a better quality employee at a higher wage. This was the strategy I used in hiring as well. I paid top dollar for top shelf employees.Report
People who are paid more and given more agency and responsibility will in general work harder and accomplish more than people who are paid minimum wage and treated like cattle. The notion that Walmart employees are Walmart employees because they’re the dregs, end of story, is genuinely offensive.Report
Nob,
Roger explains himself clearly, it seems to me, in this last comment. But I understood that as his point all along. I’m puzzled that you didn’t.
Assuming it does not lead to declines in productivity, should we not give kudos to a company that reduces its energy costs. A company that reduces production costs through more efficient flow along the production floor? Or through better inventory control? Or by reducing management costs?
Why are labor costs different?
Now if Wal Mart’s low labor costs are a cause of their claimed service and empty-shelf problems and it’s actually harming their bottom line? Then Roger’s not giving kudos, any more than he would to a company that “saved” money by not buying sufficient parts to actually produce the goods it wants to sell.Report
Mike,
Walmart management already takes this into account. Their wage strategy (which oddly I just mentioned on the other post I suspected was WRONG) is to pay a lower rate and attract a lower caliber. Other strategies can be taken. Market share reveals their strategy has yet to be beaten. Someday it will be. Perhaps by someone who offers higher salaries and attracts a better employee base. Perhaps by someone who uses no labor at all.Report
Mike,
I’m skeptical about which way you’re pointing that arrow of causality.Report
James,
You seem to be full steam on the uncharitable express this past week.
How you reduce costs is as important as whether. Since utility isn’t objective, the value of cost reduction isn’t either. Moreover, if the reduction of costs from the firm’s microeconomic scale results instead in an increased cost through externalities outside of that cost reduction, no, that’s not laudable.
Do you really have to ask this question?
If dehumanizing people who provide labor as another cost to be reduced and that any practice that reduces said costs is laudable is part of your socio-economic worldview, then perhaps subjective utility needs to be jettisoned in it in favor of an objective valuation system.
But outside of the moral framework, labor costs are also different because they’re part of a mutual exchange between labor and capital. As a result, they’re not an exogenous factor in the means of production.Report
Nob,
Well, speaking of being uncharitable, of course you know I don’t think creating externalities is ok, but here you are writing as though I might.
As to the rest, I reject your framework. Labor is a cost. People’s humanity matters to employers precisely to the extent it affects the bottom line. I suspect it does in fact affect the bottom line, and businesses that ignore our humanity do so at their own peril. It’s purely a pragmatic argument to me, though, not in any sense an ethical one.Report
@Roger I will say this again Wal-mart is not hiring “dregs” they are hiring vulnerable people. They SCREEN who they hire to make sure that the people they hire are vulnerable and can be abused. They refused my husband several times but were willing to take me because I am a middle aged woman, not as tall as their thugs managers, and because they feel women are more easily controlled by their managers. They take the elderly because they think the elderly will be more easily controlled and browbeaten too. They took so many single mothers for the floor but never to promote upwards, never ever. Their strategy is abuse.
5th try.Report
James,
Even if the de jure position is that externalities are bad, a consistent attitude that companies that exploit weaker labor standards and environmental protection and allow shifting of externalities from one jurisdiction to another are doing those jurisdictions a favor (and in fact, a great service!), while also deriding attempts at leveling fields between labor and capital and or regulators and capital is considered forms of rent-seeking and market distortion, and finally then suggesting that the ultimate end of markets is to maximize end-product consumption and that this is a form of adaptive collective problem solving at its best, it CAN be rather difficult to view this if not as de facto dismissal of externalities and other non-monetized costs, then at least an indifference to them.
If labor is simply a cost, then there’s nothing inherently wrong with using quasi-coercive means to minimize that cost. The entire history of human history and the exploitation of populations through the ages have been one of minimizing labor costs. Now, if the argument is that markets aren’t moral in themselves, but only moral because they work, that’s fine. But if we want liberal market economies, rather than authoritarian ones, then at some level basic recognition of the humanity of labor is at least something that needs to be considered.
At least as much as lauding of capital and producers for all the good they do to the point of quasi-worship.Report
Yes, Nob, as a matter of fact I do believe in slave labor, particularly of children (preferably fetuses, what with the whole two-for-the-price-of-one opportunity).
Maybe we’ll do better to talk again when you’re not looking for the worst light into which to put my comments. For now, good night and good studies.Report
@jm3z-aitch
It goes both ways. One is being ignored, because it would make people different from other inputs (crude oil isn’t lower-sulfur if you pay more for it), and we can’t have that.Report
crude oil isn’t lower-sulfur if you pay more for it
Is there some kind of contest today to write the most confusing comment? Who’s winning? Am I at least in the running, or do I need to step up my game?Report
Nob,
This isn’t getting anywhere. Let’s start over with a conversation. Let me play both roles to get things started….
Nob: Do you believe companies should engage in quasi coercive or inhumane treatment to employees?
Roger: No. Absolutely not.
Nob: Isn’t that what you mean when you say minimize employee costs?
Roger: No. I mean they should pay the market rate for the skill level which they are hiring.
Nob: When you say companies should minimize labor costs doesn’t that imply that COSTCO’s strategy is stupid?
Roger: Not at all, but thanks for pointing out the potential confusion. My comment should be read to mean that no company should overpay for a factor of production.
Neither COSTCO nor Walmart overpays for their labor. They pay different amounts because they are attracting different quality or skill of labor.
Nob: How does that work out in practice?
Roger: Let me explain what I did when I would hire:
I would go to my HR person and tell them I need four underwriters with these qualifications. The HR rep would then tell me that the going rate according to the market research for an underwriter with those qualifications working for a company with our reputation is $X. We would then put out notice that we were hiring and we would get a bunch of applications. We would weed through these and interview the best candidates that applied.
I am pretty sure Walmart and COSTCO do something similar. They pay different wages because they are looking for different skill levels. Different strategies…. Different applicants.
If this doesn’t make sense let me put it another way. If I said do not overpay for a watch it does not mean to buy a broken Timex. Nor does it mean to never buy a Movado. It means decide what quality of watch you want and then find the best watch at the lowest price that is available that meets your needs and pay no more than that.
Nob: But humans respond to incentives, respect and status, and the performance you get from them can be affected by the amount you pay. In addition, the amount of wages can affect amount of time to fill the position and turnover, and both these feed into the long term productivity equation.
Roger: Excellent point. I agree. It is up to the HR manager to understand this in providing the starting wage rate. If they set wage rates wrong, the company will have trouble attracting and retaining the right employees. This will show up in their profitability and growth and will negatively affect the stock price. This puts pressure on the company to improve their wage setting process. It is even possible that Walmart’s recent performance concerns are related to this very phenomenon. If so, they will either learn from their mistakes or eventually they will be replaced by someone smarter.
Nob: You mentioned company reputation. Doesn’t this affect wages and quality of candidates?
Roger: Good point, Nob. The reason my company worked hard at being recognized as a great place to work for families and minorities was that it allowed us to attract and retain a better caliber of employees all else equal. It was part of our overall hiring strategy. Other companies paid more and did not worry about their reputation. Others didn’t pay more nor worry about their reputation and tried to go for the low cost strategy. The market determined relative winners and losers and we adapted our approaches over time based upon our success.Report
@jm3z-aitch
I think I’m winning (though it made perfect sense in my head. Honest.) Let me try again:
A person with better compensation, better working conditions, and more agency is a different worker than he was before. You will, in most cases, see a difference in performance. That shouldn’t be controversial: it’s like saying the school hired a better coach and mowed and graded the practice field, and now the team’s winning more games.
Crude oil has a certain sulfur content. Building cool new derricks won’t change that.
This is one reason that treating labor as if it were identical to any other cost of production is fallacious.Report
@mike-schilling does have a point here:
A person with better compensation, better working conditions, and more agency is a different worker than he was before. You will, in most cases, see a difference in performance.
However, this is a truth with diminishing returns. I.E. for any given worker, improving compensation, conditions, & agency will improve performance, until you hit the max value that person can provide given their life situation, education, personality, and inherent talent.Report
Mike,
You’re correct (up to a point, as MRS notes), but you are missing the point. To the extent that treating people well increases their productivity at the margin, of course a business should do it. It’s like oiling a machine so it operates more efficiently (and so maybe people aren’t really that different after all).
Nobody here is arguing for treating employees in a way that diminishes their net productivity. We’re just arguing that a smart business keeps its labor costs at a level that maximizes the net returns from their employees. And if Wal Mart or others are failing to do that by spending too little on labor, then we’re happy to let their bad business decisions it bite them in the ass.
I think there’s been a lot of talking past each other on this issue, and from my perspective it seems to come from Roger and me assuming some common understandings that apparently aren’t so commonly understood after all.Report
Concerning the claim that pay scale helps determine “the quality of employee one gets,” I’ll have to agree but add a proviso. The people who are being paid less aren’t necessarily poor employees or poor quality employees, it’s also possible that they’re to a large degree returning the favor. Poor pay and poor treatment equals poor performance from people who otherwise could do a much more efficient job.
I submit that a lot of the so-called degraded, poor quality service workers some people complain about when they go to places like Walmart act the way they do because they’re resisting. They’re human beings and not simply labor costs.
Nobody here is really saying that these workers don’t deserve respect, although some here indeed imply that others are saying that. And I also agree that basing pay on market demand is, while not necessarily fair, probably as fair as any method of pay we’re likely to encounter in a world bedeviled by scarcity. But I do discern an attitude on this thread and the more recent Walmart threads that resembles that of a former acquaintance of mine (a VIRTUOUS SMALL BUSINESS OWNER, by the way) who spoke of them as “drones” or as a few other choice words related to what he presumed was their legal status to work in the U.S. There’s a certain style of treating service workers that meets the standard of Gary Larson’s fourth personality type that is not always the kindest.Report
Pierre,
I remember back in the ’90s when the Oregon economy suddenly started booming. Suddenly all the familiar clerks at the Quickee Mart down the street (actually, Dairy Mart, for those familiar with Oregon) disappeared, and were replaced by folks whose skills were, to be charitable, marginal. Almost all of them were, in fact, middle aged ladies who gave the distinct impression of having been out of the work force for a very very long time.
I think there was a reason why they didn’t have those jobs before, and the other employees did. Well, probably multiple reasons, given we’re talking about multiple people, but there’s no escaping the fact that they were much less productive than the people they replaced.
But over time they got better, and eventually they were quite competent convenience store clerks. But they didn’t move on to other jobs, as had the people they’d replaced.
I take multiple lessons from that story.
One: If I’m hiring, I want the person wh o’s most qualified now. If Joe can eventually catch up to Jane’s level of productivity, that’s great, but Jane’s already there so I’ll hire her if I can.
Two: If I lose Jane to a better opportunity, I will hire a Joe, and many Joes will eventually become satisfactorily productive.
Three: If a Joe really has a lot of potential, I’m eventually going to lose him, too. But if Joe’s potential tops out at convenience store clerk, I’m probably going to keep him because nobody else is going to give him a better opportunity.
So is anyone saying Wal Mart employees are “dregs?” No, only Mike Schilling and a previously banned commenter trying again under a new name (that’s my claim and I’m sticking to it!) are using that term.* Are we saying Wal Mart’s part-time clerks are, as a group, likely to be those people whose top-end productivity potential is more limited than that of other workers? Yes. Most of them undoubtedly can improve from the level they start at, and Wal Mart undoubtedly holds some of the keys to either helping or hindering their improvement, but if they have a high potential they’re not likely to remain Wal Mart employees for the long term, but to use it as a stepping stone to other jobs (and of course the state of the economy, just as for the convenience store clerks in Oregon, plays a role in how long that can take).
_______________________________
* Does anyone seriously believe that everyone out there is of equal productivity? If not, some people have to be on the low end of the distribution. In fact it’s mathematically unavoidable that some people are going to be two or more standard deviations from the mean. Pointing that out is just making a descriptive statement. Accusing the person who points that out of calling those people “dregs” is dishonest and an attempt to smear by using emotion-laden language.Report
In fact it’s mathematically unavoidable that some people are going to be two or more standard deviations from the mean.
Pet peeve alert:
You mean “empirically unavoidable”. There is nothing in the fields of mathematics or statistics that dictate which distributions will describe which real-world populations. Assuming a normal distribution is applying a rule of thumb, not a mathematical law.Report
@jam3z-aitch
Sorry it’s taken me so long to respond to your comment (I was at work being surly to customers). I’ll say I don’t think I disagree with anything you say.
I wrote a long couple of paragraphs explaining the type of thing written by others I meant my original comment to address. Fortunately, you won’t have to read them. I’ve erased them mostly because I think I was reacting very emotionally (and therefore uncharitably) to what one commenter has been saying.Report
Yes, I’m thinking ‘cutting labor costs a la Walmart is laudable’ is a bit of a strawman (but not entirely one).
There’s a case to be made that economic efficiency is laudable, because it promotes economic growth and embiggens (a perfectly cromulent word) the pie.
There’s a case to be made that Walmart is simply paying the market rate for semi-skilled labor, and paying more would either cause Walmart to raise prices or (more likely) automate more of its processes or (most likely) just allow standards to slip as the total number of mythical man-months decline in a given quarter.
There’s a case to be made that if Walmart did indeed answer all the objections of its critics, market share would just move to Amazon or to some new competitor (and then those would become the subject of the critics ire – or at least, more than Amazon already is).
And of course, there’s the counter case that Walmart corrupts local governments, has a business model thats very carbon intensive, skirts very close to violating Taft-Hartley (if it doesn’t violate it), pressures its supply chain to force them into, at best, grey zone business practices (and potentially beyond the limits of Sherman Anti-trust), and last, has many stores that are simply not pleasant shopping experiences.
But I’d like to know who specifically you are responding to that has found that Walmart should be lauded for cutting labor costs. (well, other than Bill or Hillary Clinton)Report
This was said, entirely with a straight face, in Tod’s recent thread.
Report
Nob,
What part of that shouldn’t be said with a straight face?Report
The part about it being there entirely to serve the needs of the consumer. The point of a market is to create value through voluntary exchanges of production. It shouldn’t be privileging consumption over every other potential outcome.
Further factors of production are not entirely exogenous to consumers. The assumption that labor is an exogenous factor in the production process without an endogeniety between it and other parts of the system is one of the biggest fallacies present in a lot of simplistic economic analysis. (And yes, is part of the lump of labor fallacy).Report
And it doesn’t change the point that the end result of that is: “Walmart is doing good things by cutting labor costs!”Report
The part about it being there entirely to serve the needs of the consumer. The point of a market is to create value through voluntary exchanges of production. It shouldn’t be privileging consumption over every other potential outcome.
Voluntary exchanges of production mean both sides of the exchange are consumers. Markets do privilege consumption; they exist because of consumption and to satisfy consumption. My face is straight, and it ‘s not requiring any extra effort.Report
That’s an extremely convoluted way of defining it to get to the outcome you want, James. And in that case, labor ceases to be a factor of production and is actually a consumption good that a producer involves themselves in. In which case people getting things in exchange for their labor should thus also be viewed as consumers.
Which goes straight to my point that labor is not exogenous to consumption in a free market.Report
Nob,
Yes. The point of production is consumption. If you think production is good in and of itself, then I would like you to explain why. I used the analogy of paying people to dig ditches all morning and fill the all afternoon. All production and no consumption.
Are you a fan of this type of activity? Why not? Where do you draw the line?Report
Nob,
Everyone is a consumer. The point of being a producer (investor, worker, whatever) is to gain currency which can be exchanged for consumption. We all serve each other because we can accomplish more cooperatively than we can alone.Report
Roger:
Either working for pay has to be a form of consumption for it to be a voluntary activity or labor costs are exogenous to consumption in which case employment is NOT a form of consumption with labor as the means of exchange and money or compensation as the item being consumed.
You cannot simultaneously hold that a market be founded upon voluntary exchanges and therefore be a series of consumption exchanges on both sides of the exchange, and that labor is an exogenous variable in a consumption process.
Simply put: There cannot be by definition in a free market “production without consumption”.Report
Nob,
It’s Econ 101. You’re the one making it unnecessarily complex. Seriously, what else could be the purpose of a market…to get more money to do…?
Yes, labor is consumed, but that doesn’y mean it’s not a factor of production. It’s just not end-point consumption. And of course saying the market’s purpose is consumption doesn’t make everything an emd-point condumption good (if I understand what you’re saying); it means it’s a means toward the end of end-point consumption, as is the glass that I don’t consume but which contains the beer I do consume.
Which goes straight to my point that labor is not exogenous to consumption in a free market.
I’m not following your point here, so I can’t address this directly.Report
James: Neither you nor Roger in your explicit statements say that end-point consumption is the purpose of markets. Read what you’re saying. If your point is that markets should privilege end-product consumption, then that’s an entirely different argument from saying that markets should favor consumption and that all production points within a market are types of consumption.
As for the point you say you can’t grasp. Labor isn’t an exogenous variable in production because it’s a consumption good and therefore “reducing labor costs” and treating it as simply a factor of production that’s exogenous to consumption is in itself an example of fallacious, employer/capital and end-product consumption privileging thinking. How can I make this point any clearer?Report
James: Neither you nor Roger in your explicit statements say that end-point consumption is the purpose of markets. Re
It didn’t occur to me that anyone who grasped basic economics would read it other than that. I know you grasp basic economics, so I’m puzzled by your confusion. It occurs to me you’re trying to read too closely, instead of just assuming we’re using standard basic concepts.
Labor isn’t an exogenous variable in production because it’s a consumption good
Except it’s not. There are all kinds of resources that get consumed in the production process, but that doesn’t make them “consumption goods,” a term that refers to end-point consumption. Coal gets purchased/consumed to produce energy that is purchased/consumed to produce machine tools that are purchased/consumed to produce saw reciprocating saw blades that are purchased/consumed by a “consumer.” Lots of consumed goods, but only one normally considered a “consumption” good.
and therefore “reducing labor costs” and treating it as simply a factor of production that’s exogenous to consumption is in itself an example of fallacious, employer/capital and end-product consumption privileging thinking. How can I make this point any clearer?
Perhaps by starting over and disentangling yourself on comsumption?Report
Nob,
We really have an all around epic fail at understanding each other here. Hopefully this helps…
End point consumption is indeed the purpose of markets. Not sure what I ever said to give you another impression.
However, that does not mean we should “privilege” consumption. I have checked myself recently from saying “the consumer is sovereign” for the very fear it would be mistaken as a plea to privilege consumers.
Nor does it mean that every production point is a type of consumption, whatever that even means.Report
This might be relevant to the discussion.Report
McMegan is using a poor comparison. Costco and Sam’s Club are similar businesses that directly compete. Costco and Walmart are a bit of different animals. I’ve never ever noticed that Sams’s and Costco aren’t aiming at the same customers.Report
Greg,
Liberals here used that comparison before KenB linked to McArdle, but you’re mot criticising them? And you don’t realuze that she’s criticizing the comparison?Report
James is correct. She’s criticizing the comparison of Walmart vs Costco, linking to an article comparing Walmart to Costco. Yes, Sam’s Club is more analogous to Costco, but that’s not the comparison people make because Sam’s Club isn’t in our consciousness the same way that Walmart is.Report
Hmmmm…..Well if McMegan said it then it must be wrong so let me figure out what i said ( insert smiley face here). Costco and Sam’s are analogous. Costco and Walmart should not be directly compared as businesses since they are slightly different types of store. They can be compared as retailers who treat their workers differently and then look at how it works for each of them. I think she is wrong to say WM is where poor people shop and Costco is where upper middle class people buy a metric ton of cans of Beefaroni. Here, which is of course very anecdata, many people shop and sams and coscto. I’ve never seen a difference. But i’ve shopped at both places in the lower 48 and never seen a difference either. I think that is where her error is. She is saying Walmart can’t pay like Costco does because WM caters to poor folk while Costco is dishing to the argula and kale crowd. I really doubt that nor does it remotely match my experience. From what i’ve heard Sams treats their workers the way WM does. So if that is true that Costco vs Sam/WM seems a reasonable comparison in terms of potential models of how to treat workers.Report
Costco and Walmart should not be directly compared as businesses
Be kind to your fellow liberals here, I’m sure they did so innocently.Report
Well James i think plenty of liberals make Dumb as a Bag Full of Hammers arguments. They don’t need my help to make stupid ones and i can certainly make plenty of dumb arguments without their help. I think comparing the businesses directly (WM and Costco) is wrong because they are different types of animal. I don’t think its wrong to point at Costco or Trader Joe or Quik Trip saying it is possible to pay and treat workers well yet still make money.Report
Nobody really cares about Sam’s Club, though. So yeah, you can say “Walmart and Sam’s Club” but only one of those two do we actually talk about. There are 600 Sam’s Clubs, and 11,000 Walmarts.
Also, the article says that the average Costco customer makes $80,000 a year. (It provides a link, though the link is dead.) If true, that’s significant. I doubt either Walmart or Sam’s boasts that. That also corresponds with my anecdotal experience.Report
Sam’s has more retail locations than Costco and is second in retail volume to Costco according to Wikipedia. Third is BJ’s Wholesale Club, which i’m not familiar with and sounds too naughty to be a real legal store. FWIW i’d be surprised if there was a significant difference in the clientele between Sam’s and Costco.
To the extent that anybody cares about any of the companies its a shame that to much of this discussion gets caught in one company being a goat and the other a hero. I dislike the tendency, often among liberal types, to turn one company into the the symbol for all that is evil. Which isn’t to defend WM’s practices in any way, just that an over focus on one company seems petty, personal and misses any larger picture out there. Like others, i doubt WM is much worse than most other large retail stores. FSM knows i’d rather walk into a Walmart than a Best Buy ( shudders at the thought of best buy store)Report
We shall end this subthread on a point of agreement. Best Buy is terrible.Report
I can assure you that BJ’s Wholesale Club is real.
I would love to complete the joke and say it is spectacular, but it is a dump.
It seems to attract a lot of people who use counterfeit money, for some reason.Report
greg,
Sams adn costco have very very very different customer bases.
Costco has the highest percentage of millionaires shopping there.
Costco also targets significant populations of Asians and Jews.
(This might explain how Pittsburgh has more Costcos than Philly).Report
Thanks, @will-truman . As someone who is largely indifferent to Walmart’s wages, I will say this: I feel no hypocrisy with saying that Costco is doing a good or “right” thing while simultaneously not concluding that Walmart is doing a bad or “wrong” thing.
McDonalds makes a tasty hamburger. So does Ray’s Hellburger. They couldn’t approach their burger-making process differently. I consider McDonalds’ burger tasty when I am looking for a cheap burger that will ease a hangover. I consider a Ray’s burger tasty when I want to taste the beef and the flame of the grill. Liking one does not necessitate hating the other.
tl;dr: I can want sushi for lunch and pizza for dinner and not be a hypocrite.Report
But it’s harder to say you like and appreciate good sushi, then go ahead and say “well, I don’t really care that McSushi’s uses month old fish and rice cooked in sewage water”.
Or for that matter to be a sports fan that loves a good “product” and then turn around and say you’re totally okay with leagues where endemic corruption on match results and horrible officiating occur.Report
What I appreciate is that Costco seeks to offer one sort of shopping experience and Walmart seeks to offer a different one and that different people are made happy by these different options and the success with which the different companies can put them forward.
Would I like Walmart to pay better? Sure, it’d be nice. But if it meant that people who need cheap products would have less access to them? Not so nice.
I also hear there are people who earn MILLIONS of dollars a year. That sort of make Costco and their annual salaries in the tens of thousands look like a bunch of assholes, no?Report
You keep comparing apples to oranges and claim that’s an apples to apples comparison, while then comparing apples and apples and claiming that’s an apples to oranges comparison.Report
Well, I see your Walmart-to-Costco comparison as apples-to-oranges. That’s sorta my entire point. They compete in different spaces for different consumers and offer a different shopping experience. Why would you insist that we apply the same criteria of evaluation to both?Report
@kazzy
Would I like Walmart to pay better? Sure, it’d be nice. But if it meant that people who need cheap products would have less access to them? Not so nice.
Not only that, but there is also the concern that if Walmart paid more, they would attract higher skilled applicants, enabling them to be more selective. The lower quality employee that gets the low wage job might have a more difficult time finding employment as a result.Report
By paying higher wages, CostCo gets to cherry-pick its workers. This is not a strategy that can work for every business, because the supply of higher-quality workers is limited.Report