Saturday, December 29, 2007

The Exaggerated Cost of Low Prices

My mom hates Wal-Mart, something we inevitably bring up whenever I come home. And because I love driving her crazy, each Christmas I buy at least one of her presents from the discount retailer.

Yesterday morning while saying goodbye to my parents to go through security, I let her know where I got that the orange chocolate she likes so much. "But David!" she said. "They treat their workers so badly." I didn't have time to go through all the reasons why that statement was wrong, so I just reminded her that they are not slaves. People choose to work at Wal-Mart.

Granted, many of them don't have much of a choice. But their situation is not the employer's fault. And when you understand that because they are "treated poorly" (as in no generous health benefits), Wal-Mart can offer more jobs to people who need them the most, it's hard to call them evil. The employer/employee relationship is one of exchange, not serfdom. The only things employers owe to employees is what they promise.

This recent article
by the Economist (indirectly) notes how powerful these low wages (and thus low prices) can be to those that need the most help.
Jerry Hausman of the Massachusetts Institute of Technology and Ephraim Leibtag of the United States Department of Agriculture, show that Wal-Mart's move into the grocery business has lowered food prices. Because the poorest spend the largest part of their budget on food, lower prices have benefited them most.
It's not just that the costs of low prices are exaggerated; the benefits are often shunned.

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