The Digital Diplomat

Why “Livable Wage” Probably Equals “No Wage”

by Justin Delabar on 26/07/06 at 11:11 pm

I’m all for people making more money and attaining upward mobility, but the movements to hike the minimum wage that have proven highly popular in many communities are going to do more harm than good. Take, for instance, a new ordinance passed by the Chicago City Council today that will force Wal-Mart Stores, Inc. to increase their lowest wage to $10/hour within the city’s limits by 2010. The ordinance is aimed at stores that make more than $1 billion annually, and take up more than 90,000 square feet of space. It certainly sounds fantastic and more than fair – justified, even — until the force of the market is factored in. Wal-Mart will respond to the new measure by finding creative ways to cut costs, which will lead to massive layoffs and retail store restructuring. Price hikes on what are currently cheap goods would also ensure, most likely. It’s basic, common sense economics. Any firm would undertake exactly the same methods. Good intentions do not always make good policy.

I am playing the devil’s advocate here – I understand the primary argument concerning Wal-Mart is that they invade small communities, saturate local markets with under-priced goods, and eliminate other job opportunities through their incomparable department store hegemony. However, the problem is not Wal-Mart or its obviously successful market strategy. The problem, if it can be called that, lies with the search for the great deal. Consumers sustain Wal-Mart, which in turn locks in the low wages that, when combined with ludicrously cheap foreign labor (an entirely different subject and post), creates that great deal and locks in low wage living conditions. It’s a capitalist cycle that Lenin would have loved to rip apart.

So, perhaps it does take a political movement, like the ACORN-led push to create a livable wage for Chicago-based Wal-Mart employees, to break that cycle. In the interim, however, the market is not going to be gentle to those who think Wal-Mart is legally binded to pay them more money. It’s not. In fact, Wal-Mart would be more than happy to remove its presence from Chicago and relocate to nearby areas where the market, despite the protests of the good intentioned, will happily absorb the low priced deodorant, DVDs, denture cream, wiffle bats, and all the other minutia Wal-Mart somehow fits inside its walls.