Recently Las Vegas Weekly ran a feature article entitled “Big Box O’ Poverty” about the supposed evils of Wal-Mart. The article, by one Liza Featherstone, is subtitled: “As Wal-Mart Expands in Vegas, Progressives Nationally Call for Louder Opposition to Its Exploitation of the Poor, Women and the Welfare System”
Featherstone begins by criticizing Wal-Mart for taking out ads in the local paper when poor people are getting their welfare checks. She quotes Betty Dukes who has a lawsuit charging Wal-Mart with sex-discrimination; “They are promoting themselves to low-income people. That’s who they lure. They don’t lure the rich…They don’t put Wal-Marts in those high-end parts of the community. They plant themselves right in the middle of Poorville.”
Ms. Featherstone goes on to say that Dukes is right, citing a study by a University of Connecticut economist alleging “a significant negative relationship between median household income and Wal-Mart’s presence in the market.”
A company that sells products dirt cheap to low income people should be applauded, but no, it is somehow evil to sell poor people things that they want to buy at prices that they want to pay and can afford.
What is especially nonsensical is the idea that Wal-Mart only locates its stores in poor areas. The most affluent areas of Las Vegas all have Wal-Marts: Green Valley, Summerlin, southwest Las Vegas, northwest Las Vegas, and North Las Vegas near Alliante.
Ms. Featherstone complains that only 6 percent of Wal-Mart shoppers make over $100,000 annually. But according to the U.S. Census Bureau, only 15 percent of American households in total make over $100,000. Thus the 6 percent figure is essentially meaningless.
In another stab at proving that Wal-Mart only serves the poor, Featherstone cites a 2003 study that 23 percent of Wal-Mart Supercenter shoppers make less than $25,000 per year. Unfortunately for her argument, 29 percent of all US households earn less than that amount.
The author claims consumers who have no bank account are impoverished and that 20 percent of Wal-mart shoppers don’t use banks. According to a 1998 study by Erik Hurst, Ming Ching Luoh, and Frank Stafford, however, 20 percent of all Americans don’t have a checking account. Moreover, not having enough money is not the primary reason.
Wal-Mart makes “money off of poverty,” insists Featherstone: “In a chilling reversal of Henry Ford’s strategy, which was to pay his workers amply so they could buy Ford cars, Wal-Mart’s stingy compensation policies—workers make, on average, just over $8 an hour, and if they want health insurance, they must pay more than a third of the premium—contribute to an economy in which, increasingly, workers can only afford to shop at Wal-Mart.”
Ford did increase wages but he didn’t do it so that his workers could buy his cars. Ford found that factory work was monotonous and he had tremendous turnover and thus was constantly spending money to train new employees. So, as Burton Folsum, Jr. wrote in The Freeman in 1998, Ford doubled wages and “turnover and absenteeism almost disappeared overnight.”
As the automaker’s workforce became more efficient, costs fell and Ford lowered the price of the Model T by more than 10 percent per year in 1914, 1915 and 1916. It was these price cuts that allowed more of his employees to buy his product.
Featherstone’s Marxist view of “just” or “functional” wages was dismantled by economist Henry Hazlitt almost 50 years ago in his book Economics in One Lesson: “… the best prices are not the highest prices, but the prices that encourage the largest volume of production and the largest volume of sales. The best wage rates for labor are not the highest wages, but the wage rates that permit full production, full employment and the largest sustained payrolls. The best profits, from the standpoint not only of industry but of labor, are not the lowest profits, but the profits that encourage most people to become employers or to provide more employment than before.”
Featherstone urges consumers to boycott Wal-Mart though she understands the idea will not catch on. “A consumer saves 20-25 percent by buying groceries at Wal-Mart rather than from a competitor, according to retail analysts,” writes Featherstone, “and poor women need those savings more than anyone.”
It is Wal-Mart that is serving the nation’s consumers, rich and poor, as Henry Ford did, not so-called progressives such as Ms. Featherstone.
Doug French is executive vice president of a Southern Nevada bank and a policy fellow of the Nevada Policy Research Institute.