Monday, February 28, 2005

Cut-Rate Leviathan

Over at Slate is a wonderful look at the slag-heap that is WalMart.

Yes, they provide low prices. Yes, they have a wide selection. But, they also pay over half their employees poverty wages. Which means they can't afford even the low-level health care packages. It also means they can only afford to shop at...that's right; WalMart.

I covered this a while back when I was bemoaning the fact that 2004 would mark the first year that the percentage of workers employed by small businesses in the United State would drop to 50% or fall below that mark. And how critical that statistic was: From my post (and I have made new comments at the end in italics):

The Republican Party has reduced dividend taxes and the upper income tax bracket. The former benefits the large corporations who senior leadership holds large amounts of the company's stock. The latter benefits the top 5% of taxpayers in the economic food chain. It would also benefit small business owners, who are commonly taxed at individual rates as opposed to corporate rates. Except, that as individuals they become subject to the Alternative Minimum Tax (AMT), which has yet to be addressed by Congress or the White House. This regressive piece of 70s legislation effectively boosts the small business owner's taxes much higher, which is a major impediment to growth. Meanwhile the large corporation makes more money on the lower taxes, and apparently they are pocketing the cash since unemployment has risen steadily since Bush took office. (this has now abated somewhat - Teddy)

The Democrats are no better. They have relentlessly battered small business owners with minimum wage increases and tax increases. Minimum wage increases sound good, but are ultimately damaging to both the small business owner and the worker. The owner is suddenly forced to come up with possibly tens of thousands of dollars in increased wages. Where is that supposed to come from? Well, he can either increase the price of his product or he can lay off some employees to pay the rest. The first choice can result in lower sales and increased financial pressure, the second increases unemployment and forces the remaining workers to do more work to maintain sales income. And tax increases, like the AMT, unfairly target small business owners since they pay the high-end individual rate while corporations pay the lower business-tax rate. Small business owners pay the 35% tax rate on every dollar earned after $311,950. Corporations don't pay the 35% tax rate until they hit $10,000,000. Increasing the personal tax rate hammers small business but leaves the corporations in the clear. (The minimum wage may not be that damaging to larger corporations, as new studies have shown. But the effect would be felt more in a small business - Teddy)

The result is that the small business owner is attacked from both ends of the political spectrum. Add in the spiraling costs of both health and liability insurance (thanks to a lack of tort reform and frivolous lawsuits), and it is small wonder that small business owners are on the decline. (Also, it's become obvious that doctors pushing expensive drugs, a lack of consumer education and patent laws being skewed in favor of corporations to make more profit have also pushed health care costs spiraling upwards. - Teddy)

Which suits both parties just fine. The GOP's natural allies are big business. The more people that are employed by corporations, the more people that have an interest in corporations doing well. Democrats’ top allies are the trade unions and public sector services. There is little unionism in real estate, finance, professional services and other areas where small business dominate. Hence, the Democrats have little interest. As a bonus, if the shutting down of small business creates unemployment, then the Democrats can promise those people government assistance and try to tie them to the party in that fashion. People vote their pocketbook, regardless of whether it's a corporate paycheck or government largess that is filling it. (I still think this is true - Teddy)

All this creates an environment that allows the Wal-Marts of the world to dominate. They move in and aggressively cut their prices, knowing they can make up the loss at their other stores. The small business owners, already hemmed in by spiraling insurance costs and wage increases, begin to lose business. They can't raise prices to make up the loss in sales. Eventually, they close down. Now there are maybe 100 or so people out of work. But hey, the new Wal-Mart needs people. So these people - who were probably making $10 an hour at least - are now making between $6.25 and $8.00. If they're lucky, they can work hard and move up to $9.15 an hour after a couple of years. But Wal-Mart is a corporation that has to answer to stockholders. It has a corporate policy for each store of limiting wages to a hard percentage of sales. So when the cashiers start making $10 an hour after all that hard work, they get dumped and new trainees come in at the $6.25 level again. (Sadly, this is still true - Teddy)

As the Slate piece shows, the median wage is $8.50, slightly higher than I guessed, but not by much. And since that is the median wage, it means that half the workers make less than $14,000 per year. And that's if they work 40 hours. Which they may not at WalMart, since they define "full employment" as 34 hours per week.

Funny. The French introduce the 35-hour work week to disguise their rampant unemployment and we call it foolish (which it is). But WalMart introduces an even stupider definition of full employment, and it's hailed as a business model?? C'mon! It's horrible!

How can we say that things are good when WalMart moves into rural and suburban communities and wipes out the local merchants through undercutting costs further than the small businesses can? Then, when those people are working at WalMart making 5.25 an hour, well below the poverty line, not only can they NOT afford the health-care packages WalMart makes available, but they can afford to shop at only one place - WalMart! So the company gets a good hunk of that $5.25 an hour back in the form of sales.

And then there is the aesthetics of WalMart. There is no more soul-crushing, life-sucking store in existence. The harsh lighting. The masses of numbed people milling throughout the store. The underage mothers working the cash register for the pittance that WalMart pays. It makes you depressed as Hell.

This is not to say that corporations are bad. I have said it before; they enable use to enjoy a better lifestyle through economies of scale. What I have a problem with are corporations who blatantly abuse their workforce and damage the surrounding community. And WalMart is the biggest offender.

So what can you do to fight this? Well, I do what I can to buy my goods from local merchants or larger chains that are located in-state. Here in Maine we have a supermarket chain called Hannaford's. I try to shop there, knowing I pay a certain premium over WalMart prices. And if I have to shop at a large conglomerate, I don't choose WalMart, but a more responsible company. I buy my books at local bookstores or Borders. I buy my DVDs from Borders as well.

And that is the way to fight it. Keep other people employed at better jobs by spending a little more out of pocket. Otherwise, the future is this:

Small business flounders and dies while both parties court their own special groups and mass-retailers fill the employment void creating wage slaves who earn just enough to buy the company's own products. Not exactly what I would call the American dream.

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