The Walmart Strike, Ctd

Nov 27 2012 @ 3:21pm

McArdle argued that Walmart can't afford to increase worker wages significantly. Yglesias counters:

Wal-Mart's profit margins, though by no means enormous, are larger than those of its main competitors. Given the weak national labor market, Wal-Mart has no reason to cough up extra money to its workforce. But a strong labor union could coerce them into coughing up higher pay and bringing their margins in line with Costco and Macy's. As a result, each Wal-Mart employee might get a bit less than $3,000 more a year. Whether that's "life-changing" or not is an interesting question, but since we're talking about low-wage workers here, I think the intuitions of highly paid professionals may be a bit off. It seems very plausible that the marginal hedonic value of a thousand bucks or three to Wal-Mart's workforce would be very large.

McArdle goes another round:

Walmart is not just a poor man's Costco. They're very different businesses, with very different labor models, demographics, and revenue streams. And those things work together: the fact that Costco is doing great with a given labor model or profit margin does not therefore mean that Walmart could easily follow the same course. With depressing regularity, you see pundits and activists asking "Why can't Walmart be more like Costco", which is a little like asking why Malcolm Gladwell can't be more like Michael Jordan. I mean . . . um . . . where do I even start?