Is Low Pay Worse Than No Pay?

     A "news" article complained that Walmart wasn't paying
its employees enough in Wisconsin.   If it was a real news
article it would have stuck to the facts and left the complaining
for an editorial.  The writer was picking on Wisconsin because it
had more extensive statistics than other states.

     This article claimed that thousands of Walmart employees
were getting government assistance.  The conclusion was that
this was Walmart's fault because it didn't pay its workers
enough.  The article didn't mention that many government
military employees are also getting food stamps and other
assistance beyond their pay.  It would be faint praise of Walmart
to point out that at least it is no worse than the government.

     Sometimes sellers at auctions complain that items go for
far too low prices.  Should the seller blame the high bidder who
bought the item?  But for the high bidder, the item would have
sold for even less.

     For Walmart's employees Walmart is the high bidder. 
Usually if an employee gets a better offer he accepts it.  If some
employers must be blamed for employees working at Walmart
for lower pay, it should be the employers who didn't offer the
Walmart employees better deals.  Walmart lifted the employees
above their next best opportunity.

     There are many people who claim pay should be based
on the employee's needs.  There are several reasons why this
won't  work.  First, who will decide what the employee needs? 
The employee is likely to claim that whatever he is being paid
isn't enough.  He needs a little more.  Surveys have confirmed
this to be true.

     The real problem is that wages are compensation for
value produced by the employees.  Wages can't exceed that
produced value, no matter how small it may be.  This is why
minimum wage laws cause unemployment.  Those who can't
produce more value than the minimum wage remain unemployed
at zero wage.

     An employer can pay some employees more than they
produce by underpaying others.  In the long term this doesn't
work.  Those underpaid employs will find employers who will
pay them for the value they produce.  The employer who pays
some of its employees more than they produce soon only has
those over paid employees.   Next it is out of business.  Then it
doesn't pay any employees any wages.

     In the short term this principle doesn't apply to
government jobs.  Government can pay employees more than
they produce so long as it can stick the taxpayers for the losses. 
Municipal bankruptcies, unfunded  pensions, etc. are in large
part the product of government paying employees more than they
produce.  Eventually even government will be unable to continue
paying employees more than they produce.

     Those who complain about Walmart employees being a
burden on taxpayers should instead be thankful for those
Walmart jobs.  Without those jobs the employees would be even
bigger burdens for taxpayers.

     Any pay an employee receives beyond the value of what
he produces is a gift.  Someone has to pay for those gifts. 
Trying to force investors, customers and other employees to pay
for those gifts doesn't work. The exploited investors, employees
and customers jump ship.  Then the ship sinks.

     The only sustainable solution is to leave the giving to
voluntary donors.   Any other attempted solution is only
temporary.  In the end those so-called solutions only yield lower
wages and unemployment.

     In free markets all employers bid for the services of
employees.  Employees seeking the best deals force wages up
toward the value of what each employee produces.  The average
wage can't be sustained above that level.

     The only way to raise wages further is through
investment that increases the productivity of workers.  As long
as government continues to drain investment capital and divert it
to consumption spending, we face declining productivity and
declining wages at Walmart and everywhere else.

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Copyright 2013
Albert D. McCallum