More pay leads to more spending?

Thursday, July 3, 2014

In the Sunday, June 22, New York Times, Timothy Egan wrote a column headlined “Corporate Daddy” in which he savaged Wal-Mart as “a net drain on taxpayers, forcing employees into public assistance with its poverty-wage structure.”

Ouch. True? Don’t know because I’ve never worked at Wal-Mart. But Egan wrote, “the average Wal-Mart superstore costs taxpayers $904,000 a year in various subsidies, or more than $5,000 per employee” because of their need for food stamps, Medicaid and “other forms of welfare.”

Wal-Mart, he wrote, disputes his figures and said that the average full-time store worker makes at least $12 an hour, but those figures are skewed by higher pay for management.

OK, let’s ponder that: Let us say that I make $8 per hour and you make $50. That would mean our average hourly wage is $29. I certainly feel much better knowing that.

“Hey, Mom, I average $29 dollars an hour! Well, me and Jimmy together. He’s an executive, ya know.”

Egan also quotes a piece on by Stephen Gandel in which Gandel wrote, Wal-Mart “could give workers a 50 percent raise without hurting shareholder value.”

Really? Nah, that can’t be so. Surely if it were so, Wal-Mart, the world’s biggest private employer, would step up and do ... something. OK, maybe not give every one of its 2 million workers a 50 percent wage hike, but something. How about a 20 percent wage hike?

Of course the question in any economy that is based upon the principles of capitalism is, “Why should they? Why should Wal-Mart or any other company give more money to employees just because the company can, or because it would improve the employees’ quality of life?”

And the answer came to us many decades ago far from our shores when Marie Antoinette said of the apparently hungry masses, “Let them eat cake!”

And that, really, is the answer that any corporation could give, unless the corporation is Starbucks, which, one could suppose, might tell the masses to eat cake, or bread, but at least if they were working for Starbucks, they’d be noshing on it during class. Starbucks, you see, is covering the cost of college tuition for its employees. Oh, those anti-capitalist dogs.

Here’s what I don’t understand: If a corporation could pay its employees more without hurting either executive pay or share prices, wouldn’t it make sense to do it because then the employees would have more money to spend, and if the corporation made a good product, there’s a good chance the employees would buy from the company for which they work. Right? If you work for some car company and you’re paid well and you believe that your company makes a good car and you need a car, are you going to buy ... something else? No. And you’d buy from the dealership for which you work, wouldn’t you? You wouldn’t run to the dealer five towns over and buy it there, would you? How stupid would that be? Hello, unemployment line of delight.

So, if Wal-Mart paid more and Wal-Mart employees had more to spend, isn’t it theoretically probable that they’d spend it at Wal-Mart, thus putting more money into Wal-Mart coffers, increasing Wal-Mart share prices and boosting executive pay? Right? RIGHT?

Can’t be right. Friends, I don’t even play an economist on TV, and we have to figure that because Wal-Mart, just to use it as an example, isn’t significantly increasing employee pay, it must be because my premise – more pay equals more spending at Wal-Mart equals increased share price equals increased executive pay – must be wrong.

Somehow, increased employee pay must lead to, oh, I don’t know, recession? Less spending? More spending on the wrong things? Or, maybe the worst of all, saving. Oh, God, no! Suppose employees of any company took increased pay and saved it. Oh, that’s a bad economic template, friends.

Saving is the enemy of corporate America because when you are saving – yes, YOU – guess what you’re not doing: spending.

Which, of course, brings us to the minimum wage and the logic argument is the same: If a corporation is required to pay, oh, let’s say $12 an hour because that became the federal minimum wage, it would stand to reason that its employees would have more money to spend. And if the employee works for a corporation that makes a superior product, or sells products that are either well-made or cheaper than the norm, then doesn’t it stand to reason that the employee would shop at his or her own company?

Because when the employee buys from his employer, then the employer has more money to either increase pay or hire more employees, either of which would be good for the economy and the employer. And we all know that what is good for the employer is good for corporate executives and what do corporate executives care about most?

Corporate executive pay.

So, how is this wrong? Because it must be wrong, else corporations would be paying their people more so they could make more, so that their executives could take home more with which to buy bigger mansions, etc.

Help me on this one, gang.

Clearly my ignorance of things corporate and/or economic is monumental.

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