WAL-MART: RAISE THE MINIMUM WAGE
Free-market advocates who’ve long defended Wal-Mart can only be disgusted at the recent debacle
BY LEW ROCKWELL

H. Lee Scott, Jr., the CEO of Wal-Mart, surprised many by calling for an increase in the minimum wage. This befuddled Wal-Mart haters as much as it’s disgusted its free-market defenders. And yet, let us think this through. Might there be another reason Wal-Mart would advocate the minimum wage? 

Historians such as Robert Higgs, Butler Shaffer, Dom Armentano, and Gabriel Kolko have chronicled how the rise of business regulation, including intervention in market wages, was pushed by large companies for one main reason: to impose higher costs on smaller competitors. 

This is indeed how child labor legislation, mandated pensions, labor union impositions, health and safety regulations, and the entire panoply of business regimentation came about. It was pushed by big business that had already absorbed the costs of these practices into their profit margins to burden smaller business that did not have these practices. Thus regulation is a form of violent competition. Big business gets the state to do for them what they can’t do in the free market. 

This is precisely what Wal-Mart is up to. The hint comes from the news stories: “Wal-Mart maintains that it pays above the current $5.15 an hour minimum wage to its employees.” 

The current minimum is $5.15. According to studies, Wal-Mart pays between $8.23 and $9.68 as its national average. That means that the minimum wage could be raised 50 percent and still not impose higher costs on the company. 

Wal-Mart itself makes even more elaborate claims on Walmartfacts.com: “The national average for regular hourly Wal-Mart wages is nearly twice the federal minimum wage, and higher in urban areas.” If true, the national minimum could be raised by 100 percent and leave the company unaffected. 

So who would it affect if not Wal-Mart? All of its main competition. And the truth is that there are millions of businesses that compete with it every day. Many local stores have attempted to copy Wal-Mart’s price-competitive model, and those who face lower costs can actually thrive.

There are many ways to compete with Wal-Mart. Not all shoppers like sprawling stores. Others like better service with more experts on the floor. Others just hate crowds. But a main way to compete is to hire lower-priced labor. This could mean that your employees are from a “lower” rung on the social ladder, but they too need opportunities. 

Even similar stores pay lower wages and that can make the margin of difference. K-Mart pays over a much wider range, as low as $6.75 an hour. A major competitor is mainstream grocery stores, where workers do indeed start at minimum wage. Target too pays starting employees less than Wal-Mart does, if the Target Union can be believed. 

Now, if Wal-Mart can successfully lobby the government to abolish lower-wage firms, it has taken a huge step toward running out its competition. The effect of requiring other firms to pay wages just as high as theirs is the same as if the company lobbied to force other companies to purchase only in high 

quantities, open large stores, or stay open 24 hours. By making others do what Wal-Mart does, the company manages to put the squeeze on anyone who would dare vie for its customer base. 

Now here is the great irony. The left has long been in a total frenzy about how Wal-Mart saunters into small towns and outcompetes long-established local retailers. 

Now, most of this rhetoric is overblown and ignorant. Wal-Mart would not have made any profits or grown as it has without having convinced the consuming public to purchase from the store. Consumers could put the company out of business tomorrow, just by failing to show up to buy. 

And yet the left’s claims of unfair practices would be valid if Wal-Mart did indeed work to impose legal disabilities on its competitors — in effect making it illegal to compete with the company. And yet that is precisely what raising the minimum wage would do: impose a legal disability on those companies engaged in lower-wage competition with Wal-Mart. And yet, the economically ignorant left is advocating that the minimum wage be raised. 

Free-market advocates who have long defended Wal-Mart can only be disgusted at Wal-Mart’s calling for the state to crush its competition. Even more disgusting is how the company can count on the economic ignorance of its critics to help them do it. LW

Lew Rockwell is a paleolibertarian political commentator and economist in the United States. Rockwell is the founder and President of the Ludwig von Mises Institute in Auburn, Alabama and Vice President of the Center for Libertarian Studies.