Walmart’s Charity Problem
The twittershpere exploded last week over a report that Walmart was holding a charity food drive to help employees feed their families. Comments ranged from incredulous to outraged. The standard narrative went like this: this just proves that Walmart knows it doesn’t pay enough. They’re appealing to the public to feed their employees.
Even CNN, when they picked up the story, described it this way: “One Wal-Mart store in Ohio is collecting canned food to help its workers feed their families a Thanksgiving dinner.”
The problem with this narrative was that it was mistaken, both factually and morally.
First, it wasn’t a matter of Walmart appealing to the public (or anyone else) to help feed employees. It was employees helping employees. Anyone bothering to read the story (as originally reported in the Cleveland Plain Dealer) would have found that “The food drive tables are tucked away in an employees-only area.”
Second, the food drive wasn’t for the benefit of your average, low-wage-earning Walmart employee. It was for the benefit of employees who were in exceptional need. A Walmart spokesperson was quoted as saying that the charity food drive “…is for associates who have had some hardships come up…Maybe their spouse lost a job.” In fact, the Plain Dealer has since published a follow-up story, which noted that employees at the store in question say they feel hurt by the way their food drive was reported. It clearly stings to have the world hurl shame upon you for trying to help a friend in need.
And note that low wages here are really a red herring. When it comes to workers helping fellow workers in exceptional need, wages aren’t really the issue. If your spouse loses their job, it doesn’t much matter whether you’re making $8 an hour or $12 an hour — you’re going to need short-term help.
Naturally, this won’t satisfy critics. “Still,” they’ll say, Walmart employees are badly paid. And this story is a reminder of that.” And it’s true: wages at Walmart are pretty low. And Walmart is a profitable company. So it could decide simply to give employees more money. Of course, in a market setting, giving people money you don’t owe them as a matter of contract is called “charity.” Now, charity is at least sometimes ethically obligatory. And given the disparity in wealth between Walmart employees (many of whom live below the poverty line) and the Walton family (who control the company, and who are the richest family on earth), this might be a situation where giving beyond what you’re legally required to give might be the right thing to do.
But consider this. The US unemployment rate hovering around 7.5%. That means millions of people unemployed. So ask yourself this question: if Walmart (or the Walton family) decided that it wanted to give, say, an extra hundred million dollars to help alleviate poverty, would it be better, ethically, to use that money to give 2.2 million employees a raise (roughly $50 per year, each) or to give a few thousand additional workers minimum-wage jobs, instead?
The Business Ethics Blog 
Thanks for setting the record straight. In addition to the argument you make about raising the wage for the 2.2 million employees vs. giving thousands more a minimum wage job, there’s another argument for the status quo. I’m not wedded to this argument, but I haven’t heard a good refutation from Walmart’s critics, so I’ll try it out here.
Usually, Walmart’s critics argue that they are concerned for the least well-off in our society (the poor, low wage workers). I don’t doubt their sincerity, but I doubt they’ve thought through all of the implications of their proposed changes. For example, if Walmart were to raise the wage (or be forced to through legislation) to even $12 an hour much less a ‘livable wage’, is it not possible that people with, say, a college education might be attracted to those jobs, especially in this economy? And is it not possible that those workers would out-compete those who currently get those jobs? In other words, it’s not obvious to me that such changes do in fact benefit the least well-off in the long run.
Anyways, thanks for a thought-provoking post.
FYI, here’s a good recent analysis of the potential impact of changing the minimum wage: http://www.canadianbusiness.com/blogs-and-comment/minimum-wage-proposal/
Minimum Wage – Markets and Morals
Only the customer can tell you what a product is worth. And since we have a competitive free market, where customers can choose the lowest price, we don’t really know what a customer might be willing to pay for a product.
The gap, between what the customer currently pays and what the customer is actually willing to pay, determines whether a minimum wage increase can be totally recovered in the price.
Because the minimum wage applies to all similar competitors, none of them need worry about being underpriced by the others. All competitors can recover the added cost by raising their prices. Competition would be based instead on quality and efficiency, rather than which can pay their workers the lowest wage.
That’s the economics of the problem.
There are also two moral issues.
First, to sustain the work ethic, a person must be able to support themselves by honest labor. The wages for any job must meet that minimum requirement.
Second, if a product cannot command a sufficient price to support someone producing it, then the market should be allowed to prune that product, and the worker should do something else, something of more value to others.
The point of a minimum wage is to prevent wages from being forced too low to support the worker when there is a surplus of labor in the market. Without it, surplus labor may be forced to accept wages that are insufficient to meet essential needs of food, shelter, health care, and so forth.
The minimum wage should be based upon the current cost of a package of these essentials, and should be automatically increased or decreased to reflect inflation or deflation.
Walmart, like most private companies, is a financial aristocracy that needs a large unemployed population to keep wages low. Once wages are low, they remain low because workers cannot afford to buy the goods they create and the goods become unavailable. Workers then create goods that are available to the rich. This is the ideal. The economic difference between this and slavery is that slaves can be killed directly by their employer/overseer.
The Walmart economic model – Luxury-Poverty-Charity, is one emblazoned in popular American economic mission statements as the socially parasitic doctrines of free enterprise and the American Dream. Also known as every-man-for-himself, sustained by the worlds biggest charity -“trickle-down” – which goes proxy for social responsibility. May summer riots come to their neighborhoods.
Well, the good thing about a democracy is that everybody gets just one vote, no matter how much money they have. So riots should be unnecessary. What is necessary is to make the case to the people that the minimum wage should rise by law.
The benefit of a minimum wage law is that it enables all competitors to recapture the wage cost in the price of their products. Without law, each competitor raises wages at the risk of losing customers to businesses that pay lower wages and undercut their prices.
Even if a business wanted to do right by its employees, it couldn’t, without the law. Because if it acted alone in raising its prices, it would soon be out of business.