Wednesday, May 04, 2005

There's More To Life Than The Entry Level Job

One of the things that strikes me when people complain about low wages at "restaurants" like McDonalds or retailers like WalMart, is that they focus on the entry level wage. Now, granted, it isn't as if supervisors and low-level management positions at such businesses pay enormous salaries, but they are available and they do pay better than entry level jobs. And where an employee displays a decent attitude, a willingness to work, and enough self-discipline to show up on time for scheduled shifts, it is hard for me to imagine that those jobs aren't available by way of promotion.

Now I will grant, by nature, nurture, or both, some people don't have the aptitude to rise above an entry level position. But for those people, should we really be asking why it is that their employer doesn't pay more? Sure, everybody wants to make more money for the same work, but it is safe to assume that the typical entry level worker has already chosen the employer who will pay the highest available wage. If you want to boost entry level wages, the best approach is probably to ignore the squawkings of the "chicken little" types who claim that any such increase will ruin the economy, and raise the minimum wage. But, whatever you may think of the moral aspect of low wage employment, it is probably not realistic to ask that a business, which is already paying more than the minimum wage, voluntarily pay an even greater sum so as to improve the lot of its entry level workers.

To change the employment picture, governments and workers' organizations should focus on educational opportunity and labor laws, not singling out particular businesses as "evil". Even if you believe Wal-Mart to be an "evil" company, it does no good to shake your finger at it, or even to splash it with holy water. It is unlikely to change anything it does if it means unnecessarily lowering its margins or decreasing its profits. And it is perfectly reasonable for Wal-Mart to respond that it should not be expected to do something at its own expense, where no similar demand is placed upon its competitors.

(If there is anybody out there who "hates unions" and also "hates Wal-Mart for the way it treats its employees", I would love to hear you comment.)


  1. Even though there are positions within Walmart and other employers that a person can be promoted into, a focus on the entry level wage has some value. For one thing, it is the position where it becomes easiest to compare between companies because different companies promote people at different rates of experience and skills but entry level is entry level. Entry level wages are also a good indicator of how the labor market is working in any given area. Generally, the entry level wage at the local Walmart is the market wage for non-skilled labor and, thus, is an important number.

    Labor markets are different than other markets for a number of reasons. One of them being that, in many labor markets, the playing field is not level. A labor market with a lot of little employers is very different than a labor market where one employer dominates. Unfortunatly, a typical Walmart is so big and employs so many people that it tends to have a huge effect on the labor market anyplace it happens to be located. Mostly because the usual option of quitting and going to another employer isnt available to the average Walmart employee.

    This is where unions can have a very positive effect because they can provide the workers with the balance of power that they need to get treated fairly. A lot of people don't like unions because there do exist situations where unions have too much power and when a union has too much power, it is just as bad as when an employer has too much power. The point being that things operate the most smoothly when there is some sort of balance of power between employers and workers. This can be achieved without unions when labor markets are demand side competitive (i.e. many employers) or with unions when labor markets are not demand side competitive.

    So what is the answer? I had some thoughts on this on my blog recently. While I dont think that raising the minimum wage would be as bad as "the chicken little types" might think, I also think that there are better solutions. You are correct that it isnt reasonable to expect any firm, even Walmart, to pay their workers more just to improve the lot of their workers for no other reason than because it is the right thing to do. A firm's motivation is profit and nothing is going to change that.

    I disagree that it does no good to shake one's finger at Walmart because of it's labor practices, though. Consumer and investor pressure can be pretty powerful. If enough consumers start to hate Walmart because of their labor practices and then stop shopping at Walmart because of that, Walmart would have a pretty strong motivation to change how they do business. Remember, profit is revenue minus cost and the revenue part is just as important as the cost part.

  2. The article linked indicates that, yes, good jobs can be scarce (particularly for unskilled workers), but also that the workers are making more at WalMart than they would make at other jobs for which they are qualified. And it is an unusual job market where there are not jobs available at the bottom end of the labor market - it can happen, but in most markets (even those dominated by WalMart) there are plenty of low wage jobs available.

    Even within the job economy of a WalMart, as I pointed out, there's room for advancement. So I ask again, why single out WalMart, or make it WalMart's responsibility to subsidize the lifestyles of unskilled workers, when similar demands are not made on other businesses? (WalMart has had fingers shaken at it for how many years now? And yet it was the law, not "shame" or loss of market share, which inspired it to stop locking its workers into its stores at night. You're not going to "shame" WalMart into improving its labor practices.)

    I am not sure that providing everybody with a minimum, guaranteed income, regardless of whether or not they work, is better than providing a higher minimum wage to those who actually do work. I think it is worse, actually, as you would end up subsidizing various forms of laziness, as well as providing a windfall to those who don't declare their income. It would also have an interesting effect on single income families - would the dependent spouse get the subsidy?

    I am also not convinced that college, free or otherwise, is a cure for all that ails us - there are serious problems at colleges that serve the lower end of the pool of high school graduates, with many students needing extensive remedial study before they can even take regular college courses (which may be no more difficult than similar courses offered at decent high schools).

    As you funnel the unprepared through college, and provide a curriculum that they can actually complete, you end up giving them a glorified high school diploma. (And I think that's what Bill Gates' true gripe is - I think he's actually less concerned about the inadequacies of high school education as such, than he is with the lowered quality of college education that results from enrolling huge numbers of high school graduates who were not adequately prepared for college.)

  3. If Walmart is indeed paying more than other positions where the workers are non-skilled, I think it is fair to say that Walmart probably isn’t as much of the problem as the labor market is. Walmart does have an impact on the labor market in any area where they locate just by nature of their size but they don’t control it. I don’t blame them for paying the going rate although I think that they might find that paying a decent wage would be good for their business. Obviously the management of that company disagrees with me. Heck the management of the company where I currently work apparently disagrees with me on that point. They don’t have higher wages than Walmart does. I think that people like to use Walmart as an example because of its size when it is really the whole retail industry that is the problem.

    Even within a single Walmart, there is room for advancement but realistically, most people will not advance. I think that if you or I were at Wal Mart, we would certainly advance but that isn’t true about everyone even if they have the ambition. Let’s face it, there are a lot of people who may be hard workers but who simply are not management material. So what do we do about those people who are hard workers but who will remain in the lower ranks of Walmart as a career? FWIW, I don’t think we should necessarily single out Walmart as the wage issue for retail work seems to be an industry issue rather than an issue with a single employer.

    I agree that labor laws can be an important tool in dealing with a firm that engages in poor labor practices. Certainly as was the case with Walmart locking its workers in the law worked faster than any shaming would have assuming that such an incident would have outraged the average Walmart customer. However, I also believe that the threat of losing market share can be a very powerful (if underutilized) tool. If more shoppers spent more time shopping in stores where the workers received a decent wage when such stores exist, it can make a difference.

    The main reason I believe providing a guaranteed minimum income would be better than a minimum wage is that it would not result in the same sort of labor surplus a minimum wage might cause. I don’t have the same moral objections to subsidizing various forms of laziness as other people do. It doesn’t bother me if some people in our culture get something for nothing. But I know that most people would disagree with me on that point and obviously you do too. That is why this would never happen and really isn’t a serious proposal on my part. So I admit that I have not spent a lot of time thinking about the practicalities of how such a thing would be implemented. It simply isn’t going to happen because there is now way our American culture will get past the idea of anyone being rewarded for laziness (unless they inherit their wealth, of course)

    It doesn’t have to be “college” so much as some sort of post high school training that would turn non-skilled workers into skilled workers. However, providing free tuition does not necessarily mean free tuition for everyone to the best colleges. It seems to me that colleges could still have an admissions process and those who cant get in because they aren’t good enough can use their free tuition to learn something else.

    I don’t really know what Bill Gate’s concerns are other than he has found that there is a different market for skilled labor in the United States than there is in countries like India and China. If India or China were to have economies as good as the US’s, Gates might find it hard to find good smart workers in those places too. The thing is he is getting the cream of the crop at the price of a mediocre worker in those places. Is that because our educational system is bad or because those places have a different market for skilled workers?

  4. the usual option of quitting and going to another employer isnt available to the average Walmart employee

    My cousin Kari was fired from Walmart like four years ago. She hasn't had a real job since. That is S-A-D.

    - Laura

  5. Labor markets for skilled workers in China and India run pretty far afield from the bottom end of the labor market in the United States, so perhaps that's a subject best tackled in a later post.

    As for providing a guaranteed income to do nothing, my mind tends to turn to practicalities first. If an idea is impractical, unworkable, or would constitute bad public policy, I'm likely to reject it on those grounds before even turning to whether there are valid "moral objections". I have been contemplating a blog post on this subject.

    Unfortunately, providing free training (whether college education or vocational) to people who don't have the acumen to be promoted from entry level job at WalMart is not likely to improve the lot of such a worker - even assuming you could get those workers to enroll in classes.



  7. Unions aren't really about the entry-level wages, anyway, but about job security and benefits.


Note: Only a member of this blog may post a comment.