Walmart is starting to look like a Soviet-era retailer. The prices are still low, but shelves are going empty for months while products sit unwrapped in storage, lines are interminable, and no one is around to help.
Bloomberg reports that in-store service problems for the world’s third-largest corporation are so bad that people are willing to pony up the extra cash to shop at stores like Target and Walgreens. Walmart’s problem, says MIT retail researcher Zeynep Ton, is a shortage of cheap labor:
“When you tell retailers they have to invest in people, the typical response is: ‘It’s just too expensive,’” Ton said. Adding five full-time employees to Wal-Mart’s (WMT) U.S. supercenters and discount stores would add about a half- percentage point to selling, general and administrative expenses, according to an analysis by Poonam Goyal, a Bloomberg Industries senior analyst based in Skillman, New Jersey. [...]
Wal-Mart is entangled in what Ton calls the “vicious cycle” of under-staffing. Too few workers leads to operational problems. Those problems lead to poor store sales, which lead to lower labor budgets.
Regulatory policy in the US should be making it easier, not harder to sell cheap goods to the people who depend on them. Unfortunately, current regulations don’t make it easy to pay for the labor force required to provide acceptable service while keeping prices low.
Advocates for policies like raising the minimum wage have good intentions, but they rarely consider the knock-on effects such laws can have. Walmart, which provides about 1.4 million US jobs, has shed 20,000 workers in the past five years even as hundreds of new stores have opened.
Raising the minimum wage would likely aggravate this problem, not improve it. Add onto that the costs of Obamacare and various other requirements coming down the pike, and it’s going to become very difficult for mass marketers to provide affordable goods for low income and working class consumers.
While raising the minimum wage to keep up with inflation seems reasonable and making health care accessible makes sense, looking for ways to make it easier for Walmart and its peers (which include chain restaurants like McDonalds) to hire more workers should be higher up on the policy agenda. Taxing employers to provide health care is, for example, a very good way to make sure that fewer people get hired. We aren’t saying that revenue isn’t needed for some of these purposes, but the tax system should if anything be encouraging employers to take on more workers rather than punishing them.
We’ve said before that shifting payroll taxes over to an otherwise revenue neutral carbon tax would make a lot of sense; we’d like to see health care financed that way as well. Taxing pollution is better than taxing jobs and making it harder for Walmart to provide decent goods at low prices is not the way to make America a better place for the poor.
[Image of queue in People’s Republic of Poland courtesy of Wikipedia.]