Coyote Blog

I don't think you will be able to guess who just wrote this in the LA Times:

The current frenzy over Wal-Mart is instructive. Its size is
unprecedented. Yet for all its billions in profit, it still amounts to
less than four cents on the dollar. Raise the cost of employing people,
and the company will eliminate jobs. Its business model only works on
low prices, which require low labor costs. Whether that is fair or not
is a debate for another time. It is instructive, however, that
consumers continue to enjoy these low prices and that thousands of
applicants continue to apply for those jobs.

Reason's Hit and Run has the answer.  I expressed similar thoughts here.

Progressives often wrap themselves up in a lot of libertarian-sounding jargon.  But when push comes to shove, progressives are more comfortable with coercion than free association.  James Taranto links this piece in his Friday Best of the Web:

A longtime singer and guitarist with the Zucchini Brothers and a substitute teaching assistant for Washington-Saratoga-Warren-Hamilton-Essex BOCES [school board], Powell has lived frugally for years. He works about three days a week as a sub, earning about $70 a day, with no benefits. From March to October, he rides his bike 20 miles to work when work is available....

Part of that survival--or so he thought--included shopping at Wal-Mart to take advantage of cheaper prices for himself, his partner and her two children. Then his discussions about Wal-Mart with Sandra Carner-Shafran, a teaching assistant at BOCES and a member of the Board of Directors of New York State United Teachers, started churning inside him. . . .

"I don't like what Wal-Mart stands for," Powell said, noting the mega-chain's scanty health insurance for staffers. "Because of all those things they can lower the prices."

He and his partner agreed to go on food stamps for their family rather than shop at Wal-Mart any longer.

Please observe the moral choice he made that is being applauded by those on the left:  Rather than get low cost food from Wal-mart, which generally* transacts with its suppliers, employers, and customers through mutual self-interest and the consent of all parties in each transaction, he has decided it is MORE MORAL to get his food expropriated from the American taxpayer without their consent.  Lovely.  By the way, it is ironic that he is mad that Wal-mart employees accepts jobs with no health benefits when he in fact has made the same choice himself.

More on what makes progressives tick here.

*The exception being that Wal-Mart does use the force of government via imminent domain to obtain land where the free will of landowners would not cooperate and to get special tax credits from local governments to get area citizenry to subsidize its business.  If Mr. Powell were to protest these practices, I would be all for it, but my guess is that he is not protesting government handouts to Walmart by signing up for... government handouts for himself.

Some days, I just don't have the energy to issue yet another rebuttal of serial economic ignorance.  But the folks at Cafe Hayek never seem to get tired.  You can find thoughtful rebuttals to accusations that Oil prices are too high, Wal-Mart prices are too low, and the minimum wage needs to be raised.

Last week, I posted on why Wal-Mart may be calling for higher minimum wages, and hypothesized that it may be because it won't hurt them (since they already pay well higher than the minimum) and may hurt competitors.  Llewellyn Rockwell of the Mises Institute, one of the few people in America with three sets of double-L's in his name, expands on this hypothesis:

The current minimum is $5.15. According to studies, Wal-Mart pays between
$8.23 and $9.68 as its national average. That means that the minimum wage could
be raised 50% and still not impose higher costs on the company....

So who would it affect if not Wal-Mart? All of its main competitors. And the
truth is that there are millions of businesses that compete with it every day.
Many local stores have attempted to copy Wal-Mart's price-competitive model, but
face lower costs and can actually thrive....

Even similar stores such as K-Mart can pay lower wages, and that can make the
margin of difference. K-Mart pays over a much wider range, as low as $6.75 an
hour. A major competitor is mainstream grocery stores, where workers do indeed
start at minimum wage. Target too pays starting employees less than Wal-Mart, if
the Target Union can be
believed.

Now, if Wal-Mart can successfully lobby the government to abolish lower-wage
firms, it has taken a huge step toward running out its competition. The effect
of requiring other firms to pay wages just as high as theirs is the same as if
the company lobbied to force other companies to purchase only in high
quantities, to open large stores only, or to stay open 24 hours. By making
others do what Wal-Mart does, the company manages to put the squeeze on anyone
who would dare vie for its customer base.

Now here is the great irony. The left has long been in a total frenzy about
how Wal-Mart saunters into small towns and outcompetes long-established local
retailers. Wal-Mart's opponents have whipped themselves into a frenzy about the
company's success, claiming that it always comes at a huge social cost.

Now, most of this rhetoric is overblown and ignorant. Wal-Mart would not have
made any profits or grown as it has without having convinced the consuming
public to purchase from the store. Consumers could put the company out of
business tomorrow, just by failing to show up to buy.

The left's claims of unfair practices would be valid if Wal-Mart did indeed
work to impose legal disabilities on its competitors "” in effect making it
illegal to outcompete the company. And yet that is precisely what raising the
minimum wage would do: impose a legal disability on those companies engaged in
lower-wage competition with Wal-Mart. So the economically ignorant left
advocates raising the minimum wage.

With a hat tip to Cafe Hayek, comes this article from the Las Vegas Weekly:

The shade from the Wal-Mart Neighborhood Market sign is minimal around noon;
still, six picketers squeeze their thermoses and Dasani bottles onto the dirt
below, trying to keep their water cool. They're walking five-hour shifts on this
corner at Stephanie Street and American Pacific Drive in Henderson"”anti-Wal-Mart
signs propped lazily on their shoulders, deep suntans on their faces and
arms"”with two 15-minute breaks to run across the street and use the washroom at
a gas station....

They're not union members; they're temp workers employed through Allied
Forces/Labor Express by the union"”United Food and Commercial Workers (UFCW).
They're making $6 an hour, with no benefits; it's 104 F, and they're protesting
the working conditions inside the new Wal-Mart grocery store.

"It don't make no sense, does it?" says James Greer, the line foreman and the
only one who pulls down $8 an hour, as he ambles down the sidewalk, picket sign
on shoulder, sweaty hat over sweaty gray hair, spitting sunflower seeds. "We're
sacrificing for the people who work in there, and they don't even know it."

The union accuses Wal-Mart of dragging down wages and working conditions for
other grocery-store workers across the nation. "Whether you work or shop at
Wal-Mart, the giant retailer's employment practices affect your wages. Wal-Mart
leads the race to the bottom in wages and health-care," says the UFCW's website.
"As the largest corporation in the world, Wal-Mart has a responsibility to the
people who built it. Wal-Mart jobs offer low pay, inadequate and unaffordable
healthcare, and off the clock work."

But standing with a union-supplied sign on his shoulder that reads, Don't
Shop WalMart: Below Area Standards, picketer and former Wal-Mart employee Sal
Rivera says about the notorious working conditions of his former big-box
employer: "I can't complain. It wasn't bad. They started paying me at $6.75, and
after three months I was already getting $7, then I got Employee of the Month,
and by the time I left (in less than one year), I was making $8.63 an hour."
Rivera worked in maintenance and quit four years ago for personal reasons, he
says. He would consider reapplying.

LOL.  Frequent readers will know that I usually feel the need to restate the moral of the story to insure everyone gets it.  I don't think thats necesary here.  More on Walmart and wages here and here.

This was funny, from labor boss John Sweeney (via Cafe Hayek):

Let's require big, profitable companies such as Wal-Mart to provide health care
to their employees instead of passing the cost along to everybody else, and
let's begin to develop a national health care plan that provides affordable
coverage to all Americans.

This is really, really funny.  Notice that in the first half of the sentence, he decries passing health care costs "along to everybody else" and then in the second half advocates a national health insurance plan that would pass individual health care costs onto... everybody else.  Also note that since Wal-mart, despite Mr. Sweeney's description as being big and profitable, has one of the lowest profit margins in the Fortune 100, it would likely have to raise prices in order to... pass these costs along to everybody else.

What Mr. Sweeney is actually frustrated about is that there are a large number of individuals in the labor force that he does not make decisions for and who do not in turn contribute to his personal power.

Cafe Hayek has more.

Yesterday, Flagstaff, AZ became the latest community to vote on limits to "big box" stores.  When Wal-mart wanted to create a larger store that offered groceries, a group of local citizens didn't like the idea.  Not satisfied with exercising their individual right not to shop there, they got their city government to craft an ordinance to stop Wal-mart from expanding.  Wal-mart supporters gathered signatures and forced the ordinance to clear the voters as Proposition 100.   Via Arizona Watch, the ordinance would:

1. Prevent retail establishments larger than 125,000 square feet
2. Require retail establishments larger than 75,000 square feet to restrict the
   sale of non-taxable grocery items to less than 8% of their floor space
3. Require retail establishments larger than 75,000 square feet to be subject
   to economic impact studies
4. Require a conditional use permit (and the associated community input and
   hearings) for establishments larger than 75,000 square feet

Like all zoning, the ordinance was an attempt of citizens to control the use of someone else's property without having to actually buy the property.  Fortunately, the measure failed, though narrowly.  I will say that to some extent, I have trouble defending Wal-mart.  Wal-mart often takes advantage of statist actions to grow, including accepting loads of local government incentives and even eminent domain to grow.   To some extent, getting nailed by a local government is just getting hoist on its own petard, but I will defend them anyway because I could be next.

Supporters of the ban rallied under the "new urbanism" concept:

Meanwhile, the New
Urbanism concept -- a community design that mixes residential and
businesses districts to decrease the need to drive to outlying areas --
may face some challenges.

"What this
means is we're going to have to make some alternatives to the New
Urbanism vision," said Councilmember Kara Kelty. "We understand that we
have to maximize land usage. We need to continue that effort, but we
can't do that without the public."

Basically New Urbanism supporters would rather have a bunch of expensive and limited choice (but cute!) boutiques for you to shop at rather than whatever store you would prefer to shop at.  Rather than leaving this decision up to consumers, we-know-better-than-you planners in government take this upon themselves.  Reason had a nice article on New Urbanism.  Cato critiqued the smart growth folks here.

But, don't be fooled that this is just about land use.  This reaction article from the Arizona Daily Sun has some priceless quotes (note that these are from people the reporter found shopping in Wal-mart!):

"I voted 'Yes.' I'm really
disappointed because this town has enough Wal-Marts, and I don't know
where they're going to find land space for huge stores, with that kind
of square feet. We're running out of room for people to live here. I
wonder how happy they'll be if the Super Wal-Mart was built on McMillan
Mesa, that's private land. I don't know where they're going to put one."

First, if they can't find the land, then there won't be a problem, will there?  And god forbid someone builds a Wal-mart on private land. Should we use eminent domain instead?  I must admit that to some extent I sympathize with the residents of Flagstaff.  Like Boulder or Vail, it is a small town in a beautiful mountain setting.  And, like Boulder and Vail, the wealthy of nearby large cities (Phoenix) have descended on it, buying second homes like crazy.  The result has been increased traffic and prices, offset by a white-hot economy, increases in wealth for long-time residents via existing home prices, and huge boost to the tax base that is much larger than the cost of serving the new part-year residents.  The locals are trying to figure out how to keep the capital gains in their homes, keep the extra jobs, and keep the extra taxes without actually having any new people in town, and its not really working for them.

"My first reaction was
'Boo' when they announced it. They announced it over the loudspeaker. I
heard some cheers, and I heard some claps. The one thing I hate is the
thought of creating minimum-wage, part-time jobs that do not pay their
employees' benefits. They're just going to exploit more college
students, like they do here. I do shop here for lack of a better place
to shop."

Whoa, this doesn't sound much like land use, but it sure is heard as a rationale a lot for anti-Walmart zoning.  Look, if Wal-mart is paying too little, then no one will take the jobs.  Since these are net new jobs, they likely will go to people not now currently working.  How does that hurt anyone?  By the way, you gotta love the "exploit more college students" swipe.  Since when are college students owed more than minimum wage?  I worked for minimum wage in college, and I seem to be OK.  Also, how can many college students want anything other than part-time work?  And, most hilariously, I don't know any [mostly young, healthy] college student that gives a rip about benefits (by which I presume they mean medical).  Very few college students have or need health coverage separate from their parents or school programs anyway. I wrote a lot more about Wal-mart and wages here.

By the way, this man's commitment to principals is hilarious.  When quoted, he was shopping at Wal-mart.  This person can't even be bothered with the one strong individual free-will non-coercion option open to him:  Don't shop there.  When quoted, he was at that very moment benefiting in the form of lower prices for whatever was in his cart from these supposedly horrible labor practices.  Jeez, talk about knee-jerk statism.  If half of the shoppers in that store voted for this limit Wal-mart ordinance, then get them together and boycott the damn place and you'll probably shut it down, and you could leave the government and property rights violations out of it.

Now, let us all get out our violins for this guy who voted for the limits:

"I feel like a hypocrite
because I do shop at Wal-Mart. If we let them build a Super Wal-Mart,
what happens to this current store? Are we going to have a big empty
space there? If they move it to the other side of town, I won't go over
there. This is convenient for me.

OK, so this man voted to use government force and coercion to wipe out the property rights of other private individuals because... he was afraid new stores might be less convenient?  Look folks, this is why we have a Constitution and Bill of Rights, and why the founders did not create an unlimited democracy.  51% of the people are not supposed to vote away the rights of the other 49%.  We protect rights like speech against such tyranny of the majority.  At some point, unfortunately, we stopped protecting property rights.  This is the result - your property rights effectively subsumed to people who are worried about driving too far to the store.

I will end on this one:

"I think it stinks. I
voted 'Yes' for the proposition. I definitely didn't like the tactics
(Wal-Mart) used. I wish people didn't go and shop there. I really
thought it was going to get beat. We voted down fluoride, so why not
vote down Super Wal-Mart? That's the kind of town we are. This town has
that kind of progressive attitude. I'm just disgusted with the whole
corporation -- Wal-Mart. I think it's wrong."

I have written a number of times:  Do not be fooled by the term "progressive".  Progressives, despite the name, hate bottom-up, non-controlled-from-the-top change.  More than that, they hate the decisions you make with your own property.  They believe that they can make much better decisions for your property than you can.  The next time you support the "progressives" in stripping some third party of their property rights, remember that you might be next.  Remember the progressive slogan:  "All Your Base Are Belong to Us".

After my earlier post on Walmart, I got to thinking about a number of Walmart-related topics.  My brain is a bit too fried on Friday night to organize these thoughts too much, so here they are, roughly following my stream of consciousness:

Exxon may have finally handed off the Great Satan title

The socialists of this country (who now generally call themselves progressives but its pretty much the same thing) usually need a company they can focus their attention on.  In the 1960's, this was probably General Motors, though defense contractors in the Vietnam War made a run at the title.  After the oil embargo of 1972, that title clearly moved to Exxon. I remember in one month in the early 1970's, the head of Exxon got called into Congress twice in a few weeks, once to combat the urban myth that oil companies were greedily holding oil off the market to drive up prices, and once to explain to Congress why they were greedily trying to expand oil production in Alaska.  My family and many of my friends worked for large oil companies, and we had several friends who were injured by letter bombs from domestic leftist terrorists (though the media did not call them terrorists then).

Exxon held the great Satan title for a long time.  It probably could have shed the title with low oil prices in the 80's, but the stupidity of the Valdez mess in the mid-80's and the vociferous opposition to the politically correct Kyoto accords in the mid-90's help them retain the title for a record number of years.

Finally, however, it appears that a new contender is at hand.  Walmart, so recently the most admired corporation in America, has become the new socialist whipping boy and lawsuit magnet.  Just search for Walmart in Google and you will get pages and pages of Wal-mart bashing sites.  Its kind of an amazing story how the former blue collar low-price hero of the working man trying to make ends meet has suddenly become a class enemy.  However, coming from a family that had many members who worked for Exxon, it comes as some relief to pass the Great Sata title on.

I wish everyone at Walmart could make $100,000 per year

In this, I am exactly in the same boat as Walmart detractors.  I would love for everyone at Walmart to make a ton of money.  Whether this is realistic is another story.

In America, people take jobs voluntarily

I would generally class this as a blinding glimpse of the obvious, but it appears that it has to be said.  And, if you accept that people are operating in their own rational self-interest (by the way, this is not a given -- many on the left do not think the average American is smart enough to make decisions for themself and that they need smart technocrats to look after them).  Anyway, were was I?  Oh yes, if you accept that people operate in their own rational self-interest, then by definition the job for Walmart employees is their best option, and any other option is worse.

This is the logical fallacy of those who attack Walmart (or offshore companies) for paying too low of wages.  Their concern is that these wages are lower than they, as an outside obviously smarter than everyone else observer, think they should be.  The reality is that these wages are higher than that employee's other options, and therefore is an improvement over that job not existing at all.  Note this story I told in an earlier post:

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might face a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what opposition to globalization is all about - a deep seated
conservatism that distrusts the decision-making of individuals and
fears change, change that ironically might finally pull people out of
untold generations of utter poverty.  (update:  good post in the Mises blog on Taco Bell and wages here)

It's Wages vs. Prices, not Wages vs. Profits

In aggregate, because they have so many stores, Walmart makes about $10 billion a year in pre-tax net income.  Which is a lot.  But when looked at as a percentage of sales, it is pathetic.  Given its nearly $300 billion in sales, this is about a 3.5% return on sales, which while not unusual for retailers, in the grand scheme of American business is pathetically low.  I would have to shut down my business tomorrow if I only made 3.5% of sales -- I couldn't support the investments I have to make.

Its illuminating to compare this to all those small family owned boutique
businesses that Walmart supposedly shuts down.  So here is a little
example.  Lets say that the alternative to Walmart in Smallsville, USA would be a series of boutique stores, like
the mythical Nan's Clothing Shop.  Lets
say Nan does $250,000 a year in sales,which
would actually make her shop more successful than average, particularly for smaller town mid-America.  If Nan had to live with Walmart's profit margin of 3.5%, she would end up with an annual profit of  ... $8,750.   And, if Nan is working full-time trying to make the store work, and assuming 2300 hours a year, which is probably low for a small business person, she would be making a whopping  $3.80 an hour running her store, such that she would be much better off (leaving out the personal satisfaction of running your own business) working for Walmart at the average wage there of $6.50 an hour. 

While socialists and progressives are programmed in the deepest recesses of their DNA to blame everything on profit, the wage savings Walmart may get are not going to profit.  Their profit margins are low, in fact lower than most of the smaller stores they are replacing.  If there is a wage trade-off going on, it is between lower wages and lower prices to consumers.  Which obviously makes socialist demagoguery a bit less compelling, since it means that in some sense consumers and not Walmart are to blame if wages are too low, since presumably it is consumers who make the choice to switch from the higher cost traditional boutique alternatives to Walmart.

Walmart detractors have one good point - Walmart gets far too much preferential tax treatment

I don't know why it is, but Walmart is a magnet for taxpayer subsidies.  Not only does the government love to hand out tax breaks to Walmart, it local governments go so far as to use eminent domain to put together land parcels for them.  If I was a local retailer and had my tax money used to subsidize a new competitor, or worse got my land siezed to hand over to Walmart, I would be pissed off too.

I have not really studied Walmart's tactics in this, but my sense is that they have gotten good at getting neighboring communities competing with each other.  This is a crock and a waste of taxpayer money, and nearly as bad as subsidizing sports teams.  I have a long post on the sad practice of subsidizing business relocations here.

A final thought on the most unpublicized economic miracle of the last century

Since many of Walmart's attackers focus on their treatment of women, in part due to numerous accusations of discrimination in pay and promotions, it led me to a final thought about a great economic miracle that occurred in this country in the last decades of the 20th century.

Check this data out, from the BLS:

• In 1968, the unemployment rate was 3.8%.  22.9 million women were employed in non-farm jobs, accounting for 34% of the work force.
• In 2000, the unemployment rate was 4.0%.  62.7 million women were employed in the work force, accounting for 48% of the total
• In these years, the number of women employed increased every single year.  Even in the recession years of 1981-1983 when employment of men dropped by 2.5 million, women gained 400,000 jobs

This is phenomenal.  After years of being stay-at-home moms or whatever, women in America decided it was time to go to work.  This was roughly the equivalent of having 40,000,000 immigrants show up on our shores one day looking for work.  And you know what? The American economy found jobs for all of them, despite oil embargos and stagflation and wars and "outsourcing".

I would love to see women at Walmart making more money, and some day they probably will.  Even so, though, the fact that so many have found work there is a miracle unto itself. Remember that the alternative to a $6.50 job at Walmart if the left is successful in eliminating these jobs is probably not new $15.00 jobs - it is no job at all.  Just ask the French.  Also see my recent post on the minimum wage.

Update:  This is some pretty smart PR by Wal-Mart to deflect the sprawl argument often used against it.  By the way, I challenge someone to define sprawl adequately for me in the context it is used by people who are decrying it.

Like a smoker trying to quit for the twenty-seventh time, I have tried really, really hard to limit the number tort-related rants in my blog lately.  I sometimes go for weeks without falling off the wagon,and then something comes along that is so insane, I can't resist.

Via Overlawyered.com comes this site from attorney Lewis Laska dedicated to outlining all the ways people too bored or incompetent to make money the old fashion way can try to support their lifestyles by suing Walmart.  Don't miss this page, where the attorney will sell you packets of information for how to sue for various occurrences, such as:

Parking Lots- Uneven Surface and Protrusions (16 items, $135)

Parking Lots- Improper Parking Lot Design or Marking (11 items, $90)

Entering the Store - Entranceway Floors and Floormats (21 items, $160)

Entering the Store - Doors and Doorways - Tracked-in Water (32 items,
$200)

Aisle Ways - In-Store Consumable Food on Floor (18 items, $160)

Aisle Ways - Out-of-Store Consumable Food on Floor (14 items, $120)

Aisle Ways - Unknown Substance on Floor (59 items, $200)

Aisle Ways - Packaged Product on Floor (14 items, $110)

Aisle Ways - Unpackaged Product on Floor (13 items, $100)

Merchandise - Merchandise Protruding (1 item, $15)

Shelving and Racks and Displays - Vegetable Produce Displays (1 item,
$15)

Shelving and Racks and Displays - Water/Condensation From
Vegetable/Refrigeration/Freezer Displays (6 items, $55)

Shopping Carts - Overloaded (4 items, $45)

Shopping Carts - Defective (4 items, $45)

This is only a very short sample of the whole list.  I especially like the packaged product on floor.  Get your friend to drop a box of Wheaties on the floor, and then you follow him and sue.  And how the heck is Wal-Mart at fault if you overload your own shopping cart?  Anyway, I am going to order one to see what I get.

By the way, I especially liked this whopper, I guess because he is trying to portray himself as the brave man taking on huge odds:

Most lawyers are not interested in filing suits against Wal-Mart.
The company is reluctant to settle cases promptly and fairly and almost
seems eager to take cases to trial. One of the goals of the Wal-Mart Litigation
Project is to identify lawyers who are ready, willing and able to sue the
company where a case has merit.

I hardly know where to start.  First, if lawyers are so reluctant to sue Wal-Mart, why does Wal-Mart have like 20,000 suits pending against it? (note the numbers in this article, and it is 4 years old) Second, you gotta love the part about the attorney put out because Wal-Mart won't play the part of the victim like other companies and actually demands their right to a trial.  In this one statement, you see exactly how the plaintiff's bar works - they don't really want to go to a trial.  They want to force a fast settlement that requires little of their own time and move on with their 30+% of the take.